IBM vs MSFT: Dividend Yield, Growth & Safety Comparison
International Business Machines Corp (IBM) and Microsoft Corp (MSFT) are both in the Information Technology sector, making them natural rivals for dividend investors. IBM offers a significantly higher 2.30% yield compared to MSFT's 0.84%, a gap of 1.46%. For dividend growth, MSFT leads with a 5-year CAGR of 10.3% versus IBM's 8.9%. MSFT holds the edge in dividend safety with a "Safe" rating. IBM is a Dividend Aristocrat while MSFT is a Dividend Contender.
Key Metrics Comparison
| Metric | IBM | MSFT |
|---|
| Dividend Yield | 2.30% | 0.84% |
| Annual Dividend | $6.71 | $3.48 |
| 5-Year CAGR | 8.9% | 10.3% |
| Payout Ratio | 60% | 21% |
| Consecutive Years | 30 | 20 |
| Price | $263.04 | $401.99 |
Yield Comparison
International Business Machines Corp (IBM) currently yields 2.30%, which is solid for the broader market. That's 1.46% more than Microsoft Corp (MSFT), which yields 0.84%. In dollar terms, IBM pays $6.71/share annually versus MSFT's $3.48/share.
Dividend Growth
Over the past five years, MSFT has grown its dividend at a 10.3% CAGR compared to IBM's 8.9%. IBM: Dividend growth is accelerating — the 3-year CAGR of 16.1% exceeds the 5-year rate of 8.9% and the 10-year rate of 5.9%. MSFT: Dividend growth has been steady, with a 3-year CAGR of 10.4% and a 5-year CAGR of 10.3% (10-year: 9.8%).
Dividend Safety
IBM's dividend safety is rated "Moderate." The payout ratio of 60% is moderate. The dividend is currently covered by earnings but leaves less room for growth. Earnings cover the dividend 1.7x. MSFT's dividend safety is rated "Safe." The payout ratio of 21% is well within sustainable levels, leaving room for future increases. Earnings cover the dividend 4.6x. MSFT's payout ratio of 21% is more conservative than IBM's 60%, suggesting more room for future increases.
Income Comparison
A $10,000 investment in IBM generates approximately $230/year in dividend income, compared to $84/year from MSFT — a difference of $146/year. At $100,000, that gap widens to $1460/year.
Verdict
- Best for income: IBM
- Best for growth: MSFT
- Best for safety: MSFT
Frequently Asked Questions
Which has a higher dividend yield, IBM or MSFT?
International Business Machines Corp (IBM) has a higher dividend yield of 2.30% compared to Microsoft Corp (MSFT) at 0.84%.
Is IBM or MSFT a better dividend growth stock?
Microsoft Corp has the stronger dividend growth with a 5-year CAGR of 10.3%, compared to International Business Machines Corp's 8.9%.
Which is safer for dividend income, IBM or MSFT?
International Business Machines Corp's dividend safety is rated "Moderate" while Microsoft Corp is rated "Safe." The payout ratio of 60% is moderate. The dividend is currently covered by earnings but leaves less room for growth. Earnings cover the dividend 1.7x. The payout ratio of 21% is well within sustainable levels, leaving room for future increases. Earnings cover the dividend 4.6x.
How much income does $10,000 in IBM vs MSFT generate?
A $10,000 investment in IBM generates approximately $230/year in dividends, while the same amount in MSFT generates about $84/year.
Is IBM or MSFT a Dividend Aristocrat?
International Business Machines Corp is a Dividend Aristocrat (30 years) and Microsoft Corp is a Dividend Contender (20 years).
Which has a lower payout ratio, IBM or MSFT?
Microsoft Corp has a lower payout ratio of 21% compared to International Business Machines Corp's 60%. A lower payout ratio generally indicates more room for dividend growth and better sustainability.
IBM vs MSFT: which is better for retirement income?
It depends on your priorities. IBM for current income, MSFT for dividend growth, MSFT for safety. Many retirement investors hold both for diversification.
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