After the closing bell on Jul 19, International Business Machines
IBM
reported blowout second-quarter 2021 results wherein it came up with earnings and revenue beat. The company reported its biggest quarterly sales growth in three years on the back of strong growth in its high-margin cloud computing business.
Earnings per share came in at $2.33, surpassing the Zacks Consensus Estimate of $2.25 and improving from the year-ago earnings of $2.18. Revenues grew 3% year over year to $18.7 billion and edged past the consensus estimate of $18.24 billion. Strength in cloud buoyed by increasing client adoption of its hybrid cloud platform as well as growth in software and consulting drove the robust performance in the quarter (see:
all the Technology ETFs here
).
Cloud revenues climbed 13% to $7 billion while the company’s cloud and cognitive software unit saw revenues increase by about 6%.
The company has been investing aggressively in cloud and artificial intelligence-focused ventures while shedding its slow growing legacy business. Last October, IBM announced that it would spin off its managed-infrastructure business as a new publicly traded company in a tax-free deal for IBM shareholders. The separation is expected to be completed by the end of 2021. The move will allow IBM to 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 solid results, shares of IBM jumped more than 4.3% in after-market hours. The stock has a Zacks Rank #3 (Hold) and boasts a VGM Score of A. However, it belongs to a bottom-ranked Zacks industry (
bottom 6%
).
ETFs to Buy
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 top position accounting for 8.2% allocation. DJD has been able to manage assets worth $165.5 million, while trading in volume of 45,000 shares a day on average. It charges 7 bps in annual fees and has a Zacks ETF Rank #3 (Hold) (read:
ETFs in Focus as Dow Jones Turns 125 Years
).
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 volume of around 54,000 shares per day. It charges 50 bps in annual fees and holds about 76 securities in its basket. Of these firms, IBM takes the fourth spot, making up 7.6% of the assets.
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 third position with 6% share in the basket. The product has amassed $63.9 million in its asset base and charges 70 bps in annual fees. It trades in a lower volume of 5,000 shares a day on average (read:
5 Dividend ETFs Yielding 5% or More
).
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 third spot with 5.1% share. It has AUM of $737.9 million and an average daily volume of 69,000 shares. The product charges 39 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
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 93 securities in its basket with IBM taking the fifth spot at 4.4%. 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.
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