International Business Machines Corp. (IBM) vs. AT&T Inc. (T): Tale Of The Tape

Round four: strength
A stock’s yield can stay high without much effort if its share price doesn’t budge, so let’s take a look at the growth in payouts over the past five years. If you bought in several years ago and the company’s grown its payout substantially, your real yield is likely look much better than what’s shown above. This one looks to be just as close as the last one:

IBM Dividend data by YCharts

Round five: flexibility
A company — even one as well-positioned as International Business Machines Corp. (NYSE:IBM) or AT&T — needs to manage its cash wisely to ensure that there’s enough available for tough times. Paying out too much of its free cash flow in dividends could be a warning sign that the dividend is at risk, particularly if business weakens. This next metric analyzes just how much of their free cash flows our two companies have paid out in dividends over the past four quarters:

IBM Cash Div. Payout Ratio TTM data by YCharts

Despite a spirited comeback, International Business Machines Corp. (NYSE:IBM) simply can’t overcome AT&T Inc. (NYSE:T)’s advantage of time. Had the company not bungled the transition from mainframes to PCs so badly, things might have turned out differently, as IBM boasted a strong history of dividend growth before those two awful years of historic unprofitability. There’s no doubt that the strength of AT&T’s market position will help it keep its yield high for years to come — but will that be enough to make it a better buy than the faster-growing IBM?

The article IBM vs. AT&T: Which Dow Stock’s Dividend Dominates? originally appeared on Fool.com.

Motley Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more insight into markets, history, and technology.The Motley Fool owns shares of International Business Machines (NYSE:IBM).

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