IBM

Summary

IBM does not fit the core criteria of this dividend strategy, as it operates in the explicitly avoided Technology sector. While the company's turnaround is noteworthy, the high valuation (P/E >34x) and low dividend yield (2.21%) are driven by growth expectations in the competitive AI market, not the stable, predictable cash flows of an essential service. This is not a suitable investment for this strategy and is not recommended for new positions.

Sector Context

The Technology sector is explicitly avoided by this strategy due to the high risk of rapid obsolescence and intense competition. IBM's focus on AI and hybrid cloud places it in a highly competitive, fast-changing market, which is fundamentally misaligned with the strategy's preference for stable, predictable, essential services like utilities or infrastructure.

✓ Why We Like It

• • Fails core sector criteria: Technology is explicitly avoided due to risks of rapid obsolescence and intense competition.
• • Valuation is extremely high (P/E of 34.39x), far outside the strategy's ideal range of 8-15x and the acceptable maximum of 20x.
• • Dividend yield of 2.21% is below the 3% minimum requirement for new purchases.

⚠ What to Watch

• • Permanent business model risk: The technology sector is characterized by intense competition and disruption, which is contrary to the 'forever' hold philosophy.
• • Valuation is dependent on continued high growth in AI and cloud, not stable, predictable cash flows like an essential service.
• • The stock's recent strong performance is driven by market optimism, not a temporary problem creating a value opportunity.