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IBM Posts Biggest Sales Growth in 11 Quarters: ETFs to Tap

After the closing bell on Apr 20, International Business Machines IBM reported blockbuster first-quarter 2021 results. The company reported its biggest quarterly sales growth in 11 quarters boosted by its bets in the high-margin cloud computing business, and beat the estimates for both earnings and revenues.

Earnings per share came in at $1.77, surpassing the Zacks Consensus Estimate by 10 cents but declining from the year-ago earnings of $1.84. Revenues grew 1% year over year to $17.73 billion and edged past the consensus estimate of $17.44 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).

Notably, Cloud revenues jumped 21% to $6.5 billion while the company's cloud and cognitive software unit saw revenues increase by about 4% to $5.4 billion.

The company has been undergoing changes by shedding its legacy business to focus on the growing cloud 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 3% in after-market hours. The stock has a Zacks Rank #3 (Hold) and boasts a top Value Score of A. However, it belongs to a bottom-ranked Zacks industry (bottom 36%).

ETFs to Watch

Given this, investors could easily tap the opportune moment by investing in ETFs with the highest allocation to this tech giant.

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 $1.5 billion in its asset base while trading in volume of around 63,000 shares per day. It charges 50 bps in annual fees and holds about 79 securities in its basket. Of these firms, IBM takes the second spot, making up roughly 8% of the assets.

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 fourth position accounting for 7.8% allocation. DJD has been able to manage assets worth $147.6 million, while trading in volume of 52,000 shares a day on average. It charges 7 bps in annual fees and has a Zacks ETF Rank #3 (Hold) (read: ETFs to Ride the Market Rally on Strong Economic Data).

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 6.6% share in the basket. The product has amassed $62.6 million in its asset base and charges 70 bps in annual fees. It trades in a lower volume of 29,000 shares a day on average.

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 4.9% share. It has AUM of $721.6 million and an average daily volume of 88,000 shares. The product charges 39 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook (read: 5 ETFs to Tap to Earn At Least 4% Yield & Capital Gains).

First Trust Morningstar Dividend Leaders Index Fund FDL

With AUM of $1.6 billion, the fund offers exposure to stocks that have shown the highest dividend consistency and dividend sustainability by tracking the Morningstar Dividend Leaders Index. It holds 94 stocks and IBM takes the eighth spot in the basket with 4.9% allocation. FDL charges 45 bps in annual fees from investors and trades in a solid volume of about 232,000 shares a day. It has a Zacks ETF Rank #3 with a Medium risk outlook (read: 5 Dividend ETFs Hovering at Record High).

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Microsoft Corporation (MSFT): Free Stock Analysis Report
 
International Business Machines Corporation (IBM): Free Stock Analysis Report
 
Amazon.com, Inc. (AMZN): Free Stock Analysis Report
 
INVS-DJIA DVD (DJD): ETF Research Reports
 
FT-NDQ TECH DIF (TDIV): ETF Research Reports
 
INV-SP ULT DIV (RDIV): ETF Research Reports
 
FT-MRN DVD LE I (FDL): ETF Research Reports
 
WBI-PWR FAC HD (WBIY): ETF Research Reports
 
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