As I've written about, most recently in Tending the Dividend Garden - March Update, I like to group my stocks into several categories that I relate to crops from my garden. I believe this is an apt analogy because investing and gardening both require similar traits like planning and patience. My groups are defined solely by a stock's dividend yield and dividend growth rate (DGR). The examples of my crop categories are Microsoft (NASDAQ:MSFT) for apple tree, Target (NYSE:TGT) for strawberry, Johnson & Johnson (NYSE:JNJ) for green bean, AT&T (NYSE:T) for watermelon, and Realty Income (NYSE:O) for spinach. These two metrics are by no means the only criteria I measure a stock by when performing my due diligence, but organizing my stocks based on their dividends helps to keep me balanced between the high-yielding, low DGR stocks and the low-yielding, high DGR stocks. In this article, I will explore the dividend of International Business Machines (NYSE:IBM) a bit deeper and evaluate valuation in terms of the dividend. I'll also analyze future prospects and explain why while IBM looks fairly good on the surface, the DGR is likely to drop in the near future.
