IBM

Methodology

IBM's enterprise IT services and software business generates relatively stable earnings from long-term contracts and hybrid cloud infrastructure, though legacy mainframe revenue declines. The Red Hat acquisition added cloud-native software capabilities. This calculation is complicated by the transition from legacy IT services toward hybrid cloud—normalized assumptions about sustainable software and consulting margins provide better baselines than transition periods.

Methodology

IBM often shows low PEG ratios reflecting concerns about declining legacy infrastructure revenue and modest growth prospects. The company's shift toward hybrid cloud and AI provides growth offsets but execution uncertainty. A low PEG may represent value if the portfolio transformation succeeds, or appropriately discount structural decline in traditional IT services and legacy hardware.

Methodology

IBM pays a substantial dividend yielding significantly, reflecting the cash-generative nature of legacy enterprise IT despite transformation challenges. The company maintains dividend commitment even through difficult transitions. PEGY is highly relevant for income investors seeking yield from technology, though long-term dividend sustainability depends on successfully shifting from declining mainframe revenue toward hybrid cloud and AI consulting growth.