IBM vs TXN: Dividend Comparison
Dividend data as of
International Business Machines Corp (IBM) and Texas Instruments Inc (TXN) are both in the Information Technology sector, making them natural rivals for dividend investors. Both stocks offer similar yields — IBM at 2.30% and TXN at 2.49%. For dividend growth, TXN leads with a 5-year CAGR of 14.6% versus IBM's 8.9%. TXN holds the edge in dividend safety with a "Safe" rating. IBM is a Dividend Aristocrat with 30 years of consecutive increases.
Verdict
Yield Analysis
TXN yields 0.19% more than IBM. In dollar terms, IBM pays $6.71/share vs TXN's $5.50/share annually.
Dividend Growth
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%.
TXN: Dividend growth is accelerating — the 3-year CAGR of 20.6% exceeds the 5-year rate of 14.6% and the 10-year rate of 17.8%.
Dividend Safety
IBM: 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.
TXN: The payout ratio of 1% is well within sustainable levels, leaving room for future increases. Earnings cover the dividend 1.0x.
Estimated Annual Dividend Income
Based on current dividend yields. Actual income may vary.
What does $10,000 buy in IBM vs TXN today?
At $263.04 per share, $10,000 buys about 38.0 shares of International Business Machines Corp (IBM). Each share pays $6.71 per year in dividends, so the position starts out generating roughly $255 per year — about $21 a month.
At $226.09 per share, $10,000 buys about 44.2 shares of Texas Instruments Inc (TXN). Each share pays $5.50 per year in dividends, so the position starts out generating roughly $243 per year — about $20 a month.
IBM is the larger income stream from day one: $12 per year more on the same $10,000 invested.
What could $10,000 of IBM or TXN income look like in 10 years?
International Business Machines Corp (IBM) has raised its dividend about 8.9% a year over the past five years. If that pace held, the $230 per year that $10,000 generates today at the current 2.30% yield would reach $538 per year by 2036 — a 5.4% yield on the original cost.
Texas Instruments Inc (TXN) has raised its dividend about 14.6% a year over the past five years. If that pace held, the $249 per year that $10,000 generates today at the current 2.49% yield would reach $972 per year by 2036 — a 9.7% yield on the original cost.
On those trailing rates, TXN pays more in 2036: $972 versus $538 per year. The projection assumes each five-year growth rate persists and no dividends are reinvested — real payouts will differ.
When would IBM's dividend growth overtake TXN's higher yield?
It doesn't, on the trailing numbers. Texas Instruments Inc (TXN) yields more today (2.49% vs 2.30%) and has also grown its dividend at least as fast (14.6% vs 8.9% a year over five years). Unless IBM accelerates its raises or TXN stumbles, IBM never closes the income gap — TXN wins on both current income and growth.
Can IBM and TXN afford their dividends?
International Business Machines Corp (IBM) earns $11.14 per share against $6.71 paid out in dividends — 1.7x coverage (a 60% payout ratio).
Texas Instruments Inc (TXN) earns $5.45 per share against $5.50 paid out in dividends — 1.0x coverage (a 1% payout ratio).
IBM's wider coverage leaves more cushion if earnings dip. As a rule of thumb, coverage below about 1.5x (a payout ratio above ~65%) is where a dividend starts to look stretched — worth watching for TXN if earnings weaken.
Which fits an early-retirement income portfolio better, IBM or TXN?
For income you need right now, Texas Instruments Inc (TXN) leads: $100,000 invested today pays about $207 a month at the current 2.49% yield, versus $192 a month from International Business Machines Corp (IBM) at 2.30%.
TXN also leads on dividend growth (14.6% vs 8.9% a year over five years), so the trailing numbers favor it on both fronts.
On consistency: IBM has raised its dividend 30 consecutive years.
Many income investors simply hold both — the mix pairs current yield with growth and spreads single-name risk. Whichever way you lean, dividends are never guaranteed; recheck the payout each quarter rather than setting and forgetting.
$10,000 with DRIP: projected annual income
If each holding keeps raising its dividend at its real 5-year rate and every payment is reinvested, a $10,000 position pays $675/yr in IBM vs $1,243/yr in TXN by year 10.
Assumes dividends are reinvested at the current yield and grow at each holding's trailing 5-year dividend CAGR. A projection, not a prediction — no price appreciation modeled.
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