After the closing bell on Oct 20, International Business Machines
IBM
reported mixed third-quarter 2021 results wherein it came up with an earnings beat but lagged on revenues.
Earnings per share came in at $2.52, surpassing the Zacks Consensus Estimate of $2.49 but less than the year-ago earnings of $2.58. Revenues grew 0.3% year over year to $17.62 billion and fell short of the consensus estimate of $17.76 billion. The revenue miss highlights the challenge of fulfilling the company’s pledge to return to growth this year as it prepares to spin off its low-growth legacy computer services unit. Weak sales in legacy IT management and systems units outweighed robust demand for cloud computing (see:
all the Technology ETFs here
).
Cloud revenues climbed 21%, while the company’s cloud and cognitive software unit saw revenues increase by about 2.5%.
The company has been investing aggressively in the cloud and artificial intelligence-focused ventures while shedding its slow-growing legacy business. Earlier this month, IBM approved the separation of its $19 billion managed infrastructure services business, which is currently part of the Global Technology Services segment, into a new public company, Kyndryl, effective Nov 3. This will allow IBM to focus more on cloud computing and artificial intelligence and be “laser-focused on the $1 trillion hybrid-cloud opportunity.” Although Amazon
AMZN
and Microsoft
MSFT
dominate the cloud market, the spin-off would help to revive fortunes at the 109-year-old company.
Following the results, shares of IBM fell 4.6% in after-market hours. The stock has a Zacks Rank #4 (Sell) and boasts a VGM Score of A. It belongs to a bottom-ranked Zacks industry (
bottom 26%
).
ETFs in Focus
Given this, investors could easily tap the opportune moment by investing in ETFs with the highest allocation to this tech giant.
Invesco Dow Jones Industrial Average Dividend ETF
DJD
This ETF offers exposure to dividend-paying companies included in the Dow Jones Industrial Average by their 12-month dividend yield over the prior 12 months. It holds 28 stocks in its basket, with IBM occupying the second position accounting for 7.2% allocation. DJD has been able to manage assets worth $172.2 million, while trading in volume of 21,000 shares a day on average. It charges 7 bps in annual fees and has a Zacks ETF Rank #3 (Hold) (read:
ETFs to Play Dow Jones’ Best Start to October Since 2003
).
First Trust NASDAQ Technology Dividend Index Fund
TDIV
This fund provides exposure to dividend payers within the technology sector by tracking the Nasdaq Technology Dividend Index. The product has amassed $1.6 billion in its asset base while trading in a volume of around 50,000 shares per day. It charges 50 bps in annual fees and holds about 93 securities in its basket. Of these firms, IBM takes the fourth spot, making up 8.1% of the assets.
Invesco S&P Ultra Dividend Revenue ETF
RDIV
This product invests in securities on the S&P 900, which excludes the top 5% of securities by dividend yield, top 5% of securities within each sector by dividend payout ratio, selects the top 60 securities by dividend yield, and re-weighs those securities according to the revenues earned with a maximum 5% per company weighting. The fund holds 61 stocks in its basket, with IBM taking the sixth spot with a 5% share. It has AUM of $693.7 million and an average daily volume of 66,000 shares. The product charges 39 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook.
WBI Power Factor High Dividend ETF
WBIY
This ETF offers exposure to quality stocks that have the highest dividend yield with a deep value bias and multi-factor fundamental analysis. It follows the Solactive Power Factor High Dividend Index, holding 51 stocks in the basket. IBM takes the ninth position with a 4.8% share in the basket. The product has amassed $64.8 million in its asset base and charges 70 bps in annual fees. It trades in a lower volume of 4,000 shares a day on average (read:
5 Dividend Aristocrat ETFs in Focus for a Stable Finish to Q4
).
Global Beta Smart Income ETF
GBDV
This product is designed to provide exposure to dividend-paying stocks within the S&P 900 with the highest average 12-month trailing dividend yield over each of the prior four quarters by tracking the Global Beta Smart Income Index. It holds 94 securities in its basket with IBM taking the second spot at 4.6%. GBDV has gathered $2.6 million in its asset base and trades in an average daily volume of under 1,000 shares. It charges 29 bps in annual fees and has a Zacks ETF Rank #3.
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