IBM vs Microsoft Which Is Stronger?

IBM and Microsoft are two of the largest technology companies in the world, each with a long history of innovation and success in the industry. Both companies have been publicly traded for decades, offering investors the opportunity to own a piece of their respective businesses. Their stocks have always been popular choices for investors looking to capitalize on the growth potential of the technology sector. In this comparison, we will delve into the key differences and similarities between IBM and Microsoft stocks, helping investors make informed decisions about their investment strategies.

IBM or Microsoft?

When comparing IBM and Microsoft, different investors may prioritize various metrics based on their investment strategies and goals. So, ask yourself what type of investor you are. This will guide you in determining which metrics are most important for your investment decision between IBM and Microsoft.

Dividend Investors:

Dividend investors look for stable and growing income streams, using dividend metrics to assess potential investments. A company's dividend yield essentially measures the size of its dividend relative to the total market value of the company. IBM has a dividend yield of 2.89%, while Microsoft has a dividend yield of 0.69%. Beyond the yield itself, considering the growth and sustainability of these dividends is also crucial. IBM reports a 5-year dividend growth of 1.32% year and a payout ratio of 95.65%. On the other hand, Microsoft reports a 5-year dividend growth of 10.16% year and a payout ratio of 24.63%.

Value Investors:

Value investors focus on financial metrics to determine a stock's intrinsic value compared to its market value. The Price-to-Earnings (P/E) Ratio links stock price to a company's earnings per share, with IBM P/E ratio at 33.21 and Microsoft's P/E ratio at 36.73. Another crucial valuation metric is the Price-to-Book (P/B) Ratio, which compares stock price with book value per share. IBM P/B ratio is 8.69 while Microsoft's P/B ratio is 11.55.

Growth Investors:

Growth investors prioritize metrics indicative of a company's expansion potential. Focusing on top-line growth, IBM has seen a 5-year revenue growth of -0.22%, while Microsoft's is 0.99%. Return on Equity (ROE) measures how effectively a company uses equity investment to generate earnings, with IBM's ROE at 27.14% and Microsoft's ROE at 34.56%.

Retail Investors:

Retail investors often consider stock affordability and company familiarity. For example, day low prices are $230.26 for IBM and $445.58 for Microsoft. Over the past year, IBM's prices ranged from $157.89 to $239.35, with a yearly change of 51.59%. Microsoft's prices fluctuated between $366.28 and $468.35, with a yearly change of 27.87%. Brand recognition also plays a role, as familiarity with a company can influence investment decisions.