The stock price of IBM (IBM) has moving upward and Mr. Buffett on CNBC mentioned being happy IBM was repurchasing shares. Therefore, it was decided to look at how much of net income and revenue was being used for share repurchases. And the dividend and total payout ratios. The total payout ratio is dividends plus share repurchase.
This is a historical look back. I have reference books from the 1960's and 1970's and may create a follow-up article to share some of those details. Here is one tidbit, IBM in 1970's had a market capitalization of over $50 billion, according to data calculated from the Moody's Handbook of Common Stocks, Fall 1977 Edition.
IBM is a very successful business that generated over $100 billion of revenue in 2011. However, since the end of 2001 to 2011 shareholder equity has declined from $23.614 billion to $20.236 billion. Yearend 1976 capitalization (common plus surplus) was $12.7 billion, according to the Moody's Handbook of Common Stocks, Fall 1977 Edition.
Net income has totaled nearly $106 billion the past ten years. With $20.439 billion provided to owners in dividends for a 19.34% payout ratio. Share repurchases (funds to sellers) have totaled $74.884 billion for a 70.85% payout. The total payout ratio was 90.19% with $95.323 billion.
The traditional payout ratio that looks at dividends requires adjustment to include the funds used to repurchase shares. Otherwise the plow-back ratio might be overstated. I am calling this the total payout ratio. The combination of dividends and share repurchases.
| Year | Total Payout Ratio % | Net Income (millions) | Share Repurchase (millions) | Dividend (millions) | Repurchase Payout Ratio % | Dividend Payout Ratio % | Equity (millions) |
| 2011 | 101.33 | 15,855 | 12,593 | 3,473 | 79.43 | 21.90 | 20,236 |
| 2010 | 100.72 | 14,833 | 11,763 | 3,177 | 79.30 | 21.42 | 23,172 |
| 2009 | 53.91 | 13,425 | 4,377 | 2,860 | 32.60 | 21.30 | 22,755 |
| 2008 | 76.12 | 12,334 | 6,804 | 2,585 | 55.16 | 20.96 | 13,465 |
| 2007 | 161.76 | 10,418 | 14,705 | 2,147 | 141.15 | 20.61 | 28,470 |
| 2006 | 85.15 | 9,492 | 6,399 | 1,683 | 67.41 | 20.82 | 28,506 |
| 2005 | 97.76 | 7,934 | 6,509 | 1,250 | 82.00 | 15.75 | 33,098 |
| 2004 | 78.03 | 8,448 | 5,418 | 1,174 | 64.13 | 13.90 | 29,747 |
| 2003 | 56.71 | 7,613 | 3,232 | 1,085 | 42.45 | 14.25 | 27,864 |
| 2002 | 76.72 | 5,334 | 3,087 | 1,005 | 57.87 | 18.84 | 22,782 |
| 2001 | 23,614 | ||||||
| 10 Yr Total | 105,686 | 74,884 | 20,439 | ||||
| 10 Yr Avg. | 90.19% | 70.86% | 19.34% |
Source data: 10-k filings at SEC
% of Revenue
| Year | Revenue (millions) | Total Payout Ratio % Rev | Dividend Payout Ratio % Rev |
| 2011 | 106,916 | 15.0 | 3.2 |
| 2010 | 99,870 | 15.0 | 3.2 |
| 2009 | 95,758 | 7.6 | 3.0 |
| 2008 | 103,630 | 9.1 | 2.5 |
| 2007 | 98,786 | 17.1 | 2.2 |
| 2006 | 91,424 | 8.8 | 1.8 |
| 2005 | 91,134 | 8.5 | 1.4 |
| 2004 | 96,293 | 6.8 | 1.2 |
| 2003 | 89,131 | 4.8 | 1.2 |
| 2002 | 81,186 | 5.0 | 1.2 |
Source data: 10-k filings at SEC
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
