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International Business Machines Corp. (NYSE: IBM) stock has fallen 14.8% in the past year – but the IBM dividend is attracting investors to keep buying.
Right now, the IBM dividend yield is higher than it's ever been at 2.78%. That compares to a 1.6% industry average and 2.2% for the S&P 500, according to Morningstar.
But investors are better off going elsewhere for yield, because those payouts are not stemming from a healthy company.
IBM isn’t an innovator in consumer tech or tech hardware anymore. True, they do still sell hardware. But hardware makes up less than 10% of their business.
IBM knows it needs to have a bigger presence in the growing market for cloud computing and Big Data services to offset losses in legacy businesses. But IBM is far from an early mover in these areas. It's merely competing at this point, it's not setting the standard in IT architecture like it once did.