IBM just got hit with one of its worst single-day drops in years. Shares fell over 13.2% on Feb. 23, 2026, closing at $223.35. 

The culprit? Anthropicannounced its Claude Code tool could automate much of the tedious, expensive work involved in COBOL modernization — a key IBM (IBM) business.

That panic-driven sell-off pushed IBM stock down more than 24% year to date. For growth investors, that’s a problem. But for dividend hunters, the drop may have opened a door worth walking through.

The question isn’t whether AI disruption is real. It clearly is. The real question is whether IBM’s dividend is in danger — and whether the sell-off pushed the stock into bargain territory.

IBM offers an attractive dividend yield

IBM vs. Anthropic

Riccardo Savi/ Getty Images COBOL is the backbone of financial infrastructure. An estimated 95% of ATM transactions in the U.S. run on it. 

Anthropic said its Claude Code tool can map dependencies across thousands of lines of COBOL code, document workflows, and flag risks that would take human analysts months to surface. 

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Anthropic described it plainly: “Legacy code modernization stalled for years because understanding legacy code cost more than rewriting it. AI flips that equation.”

That’s a real threat to part of IBM’s business. IBM has long sold mainframe systems optimized for COBOL-heavy transaction processing. A tool that makes it dramatically cheaper to migrate off those systems is a direct threat.

But context matters here. IBM CEO Arvind Krishna said on the company’s fourth-quarter 2025 earnings call that IBM’s own Watson Code Assistant for Z already does something similar — it can refactor COBOL into Java and help developers understand legacy code. 

More importantly, IBM’s mainframe business is only part of the story.

  • The company’s software segment now accounts for roughly 45% of total revenue, up from about 25% in 2018.
  • Software grew 9% in 2025, the highest annual rate in IBM’s history. 
  • And the z17 mainframe delivered its highest fourth-quarter revenue in more than two decades, up 61% year over year in Q4 2025 alone.

The market’s reaction looks like a classic “sell first, ask questions later” moment — the kind that sometimes creates real value for patient investors.

IBM stock dividend: the key numbers

After a stock drops 24% in a matter of weeks, the yield math changes fast. At $223.35 a share, IBM’s dividend now offers income investors a more attractive entry point than it did at the beginning of the year.

Here’s a snapshot of IBM’s key dividend metrics:

  • Annual dividend per share: $6.72
  • Quarterly dividend per share: $1.68
  • Dividend yield (at $223.35): approximately 3.0%
  • Dividend growth rate (20-year average): approximately 11.2% per year
  • Free cash flow (2025):$14.7 billion — the highest in over a decade

The payout ratio is the most important factor for dividend safety. Given its free cash flow, IBM stock ended 2025 with a payout ratio of less than 50%, which is sustainable. 

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The company also guided for free cash flow to grow by about $1 billion in 2026, to roughly $15.7 billion. That kind of cash generation is what keeps dividends safe through downturns.

In fact, analysts forecast that IBM’s annual dividend will grow to $6.84 per share by 2028. 

IBM grows AI book

The bear case rests on the idea that AI tools like Claude Code will erode IBM’s mainframe business faster than the company can adapt. That’s possible. But the bull case has numbers to back it up, too.

  • IBM’s cumulative generative AI book of business surpassed $12.5 billion by the end of 2025.
  • The company’s Automation segment grew 14% in Q4.
  • Its Data segment was up 19%.

IBM Chairman Arvind Krishna noted on the earnings call that AI is also a major productivity driver within IBM.

The company exited 2025 with $4.5 billion in annual run-rate savings from internal productivity initiatives — well ahead of its original $2 billion target set in 2023.

Krishna stated: None of this sounds like a business in freefall.

The more nuanced reality is that IBM is both a target of AI disruption and a participant in it. 

The same AI wave that threatens parts of its legacy business is the wave it’s been riding — with its own mainframe AI inferencing chips, the z17’s Spyre cards, Red Hat AI, and its watsonx platform.

Should dividend investors care about the sell-off?

When a stock drops sharply on news that’s legitimate but arguably overstated, the dividend yield rises. IBM’s current yield of roughly 3% is above its 52-week average and meaningfully higher than where it stood just weeks ago.

Free cash flow comfortably covers the payout. And IBM entered 2026 with real momentum — record software growth, record mainframe revenue, and a clear path to expanding margins.

That doesn’t mean the AI-disruption threat posed by tools like Claude Code should be ignored.

But IBM’s own tools, partnerships with companies including Anthropic, and its deep enterprise relationships — 45 of the top 50 banks run on IBM mainframes, as do four in five of the top airlines — make the company hard to displace overnight.

For income-focused investors who’ve been watching IBM from the sidelines, the sell-off may be worth a closer look. 

Whether that makes it a bargain depends on how you weigh near-term AI disruption risk against long-term enterprise value. But the dividend itself? That looks safe.

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