IBM Stock Split History & Price Forecast

If the heyday of a company is measured by the number of times its stock price splits, the future is ominous for IBM.

The first IBM stock split took place in 1926, fifteen years after the company was founded when it underwent a 3:1 stock split. 

It took almost two decades before the next two IBM stock splits took place. A 25% stock split was recorded in 1946 and a 75% stock split occurred in 1948.

In the 1950s, IBM split its stock 2-to-1 in 1957 but it wasn’t until the swinging sixties that management went on a run of stock splits and increasing the number of outstanding shares as a result by a considerable extent.

Indeed, if you were to make an IBM stock price forecast back then, the safe bet would have been to predict higher prices because it was the heyday for the firm.

IBM shares split on a 5-to-4 basis back then meaning if you owned 4 shares prior to the split, you would have owned 5 after the split.

These days you don’t see such awkward split numbers as often. But over ensuing decades, the IBM stock split history was peppered with similar ratios.

IBM Stock Split History

Date	IBM Stock Split History
May 18 1964	5:4
May 18 1966	3:2
April 23 1968	2:1
May 29 1974	5:4
June 1 1979	4:1
May 28 1997	2:1
May 27 1999	2:1

*Source: IBM

In the 1960s alone, IBM split three times. And before the century was out, another four more IBM stock splits took place.

A buy-and-hold investor who held 100 shares before the first stock split would have owned 7,500 shares by the turn of the new millennium.

Using the IBM share price today, that 100 share investment would have grown to approximately $1,125,000. Not a bad pay day for putting your faith in perhaps the most innovative technology company of its day.

Since the turn of the century, the IBM split history has been noticeably barren. The failure of IBM’s share price to gain much traction in recent years is the reason why management has likely decided against another split.

Perhaps nothing highlights the lack of “umph” behind the stock as much as its revenue profile. IBM revenues have either declined or stagnated at best in recent years depending on the time frame you examine.

For example, when we looked at the past 10 years we were surprised to see just how substantial the fall has been from $98 billion in top line sales in 2013 to $60.5 billion in fiscal year 2023.

Even Warren Buffett decided enough was enough and abandoned ship in 2017. He sold his position and instead built a stake in Apple, which has already been a big winner for his holding company, Berkshire Hathaway. Today, Apple represents an astonishing 51% of his entire equity portfolio.

IBM Stock Dividend

For long-term oriented investors, it’s not all gloom and doom. The IBM stock dividend at the time of our research was 4.50%. That’s quite a payout for a technology company that has a pipeline of future innovations which could spark growth.

The sustainability of the dividend however is more in question because the payout ratio is an astonishing 295%, suggesting that management is stretched in maintaining the dividend at the expense of reinvesting in the business. Another way of saying that is that cash flows are being used to pay shareholders versus invest in the R&D crucial to drive revenues in the future.

Investors hoping for a bullish IBM stock price forecast will need to peg their hopes to stabilizing revenues, new partnerships, and future innovations.

The IBM Watson deep learning artificial intelligence tool is aimed at business seeking to use AI to improve processes and boost revenues. From changing business workflows to analyzing tennis stats the U.S. Open, Watson does it all. Watson is also aimed at the massive healthcare industry. The goal is to produce value-based care that is more aligned with patient outcomes.

For a long-time it was hoped that would transform IBM, but Open AI appears to have pulled the rug from under IBM in that regard. The tipping point in AI came when Open AI launched its Chat GPT product and Alphabet followed suit quickly with Bard. IBM, which first brought AI to prominence with Watson, appears to have been left in the dust.

Nevertheless, a growth lever could be IBM blockchain initiatives. IBM LedgerConnect is designed for financial services companies who want to apply blockchain technology to build new applications.

The applications of IBM’s technology knows no bounds. For example, IBM blockchain technology is used by Maersk to simplify shipping logistics and operations.

IBM Stock Price Forecast

From a financial perspective, the IBM price/earnings ratio (trailing) is sky high at 62. Trading at 6x book value is lofty too. Add the 2.2x price-to-sales multiple it trades at and you can see IBM isn’t exactly a steal at these levels. Analysts seem to agree and have a $144 price target on the stock, which is slightly below where the share price currently trades.

Our analysis of cash flows is a bit more optimistic, and puts fair value closer to $164 which would suggest about 11% upside but it’s by no means a bet that is likely to result in a home run. If anything, IBM requires fundamental changes to its inner plumbing to catalyze change and ignite another bull run that would result in future stock splits.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.