Tulsa Tornadoes
Tornadoes touched down outside Tulsa, Oklahoma on Monday, just as we were arriving there on business. However, the stock market’s Tulsa Tornado was IBM’s announcement at it’s annual shareholder meeting in Tulsa (why they picked Tulsa - who knows) that it would raise its dividend by 50% to $0.30 per year, which now equates to roughly a 1.5% yield. The stock picked up steam on the news and continued to gain today.
Tech is not the growth vehicle it once was, and the smart companies in the space realize this. Microsoft initiated a dividend, paid out a one-time dividend, and is buying back massive amounts of its own shares. IBM has now raised its dividend and increased its buyback authorization. Oracle is buying other companies for cash (rather than the stock-based acquisitions of the old days.) Although the approaches are different, all three strategies have the same end effect: they reduce the amount of investment capital deployed on technology. If the old investments are not returning the growth they should, the right response is to take that capital off of the markets so the existing levels of sales and earnings are spread among fewer investors.
The process will be long, but it will leave the industry far stronger.
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