Just got the 2011 IBM annual report. It never ceases to amaze me how much money this company puts into share repurchases, rather than actual dividends.
For 2011, the company boasts that they were “… able to return $18.5 billion to you,” the shareholder. Of course, a paltry $3.5 billion of that was actually returned to shareholders in the form of a dividend. The remaining $15 billion went into buying back shares, which does a lot more to make it easier for executives to meet various per share bonus targets than it does to enrich shareholders. Theoretically, shareholders benefit from fewer outstanding shares, but I bet most shareholders would have benefited more from a triple-size dividend payment.
Any way, this is par for the course for IBM which spent $15 billion in 2010 and 2011, and $7.5 billion in 2009 buying back its stock. And, it isn’t done, yet. The board has already authorized the repurchase of $8.66 billion more stock, and there is little doubt the board will approve a new $15 billion or more in share repurchase authorizations for 2012.
As a shareholder, you must factor this into your investment. Your dividend will be substantially lower than it should be from a company of this size and health, but over the long-term, you may benefit from the ongoing reduction in the amount of IBM shares outstanding.