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ETFs in Focus Post Mixed IBM Q4 Earnings

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After the closing bell on Jan 21, International Business Machines (IBM - Free Report) reported robust fourth-quarter 2020 results. The company beat earnings estimates but missed on revenues.

Earnings per share came in at $2.07, surpassing the Zacks Consensus Estimate by 29 cents, but declining from the year-ago earnings of $4.71. Revenues declined 6% year over year to $20.4 billion and fell short of the consensus estimate of $20.59 billion. This represents the fourth consecutive quarter of revenue decline. Weaker-than-expected revenues came from a rare sales decline in its software unit as clients shied away from longer-term deals due to the pandemic-induced economic uncertainty (see: all the Technology ETFs here).

This weakness was unable to offset by strength in the cloud computing business. Notably, Cloud revenues increased 10% to a record $7.5 billion in the fourth quarter.

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.”

Though Amazon (AMZN - Free Report) and Microsoft (MSFT - Free Report) dominate the cloud market, the spin-off would help to revive fortunes at the 109-year-old company. IBM expects returning to sales growth in 2021, citing confidence in the sales rebound in the global business services unit and a weaker dollar (read: U.S. Dollar Sees First Drop Since 2017: ETFs & Stocks to Buy).

As revenues are on a continued deceleration path, shares of IBM sank nearly 7% in after-market hours. The stock has a Zacks Rank #3 (Hold) and a VGM Score of A. It belongs to a bottom-ranked Zacks industry (bottom 16%).

ETFs to Watch

Given this, ETFs with the highest allocation to this tech giant will be in focus. Investors should closely monitor the movement of these funds and grab the opportunity whenever it arises.

First Trust NASDAQ Technology Dividend Index Fund (TDIV - Free Report)

This fund provides exposure to dividend payers within the technology sector by tracking the Nasdaq Technology Dividend Index. The product has amassed $1.4 billion in its asset base while trading in volume of around 76,000 shares per day. It charges 50 bps in annual fees and holds about 85 securities in its basket. Of these firms, IBM takes the second spot, making up roughly 7.4% of the assets (read: Wil Nasdaq ETFs Win in 2021 After the Best Year Since 2009?).

WBI Power Factor High Dividend ETF (WBIY - Free Report)

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 top position with 7.6% share in the basket. The product has amassed $46.1 million in its asset base and charges 70 bps in annual fees. It trades in a lower volume of 7,000 shares a day on average.

Invesco Dow Jones Industrial Average Dividend ETF (DJD - Free Report)

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 6.5% allocation. DJD has been able to manage assets worth $126.3 million, while trading in volume of 54,000 shares a day on average. It charges 7 bps in annual fees and has a Zacks ETF Rank #3 (Hold).

Invesco S&P Ultra Dividend Revenue ETF (RDIV - Free Report)

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 ninth spot with 4.4% share. It has AUM of $636.8 million and an average daily volume of 100,000 shares. The product charges 39 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook.

First Trust Morningstar Dividend Leaders Index Fund (FDL - Free Report)

With AUM of $1.4 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 100 stocks and IBM takes the seventh spot in the basket with 4.7% allocation. FDL charges 45 bps in annual fees from investors and trades in a solid volume of about 260,000 shares a day. It has a Zacks ETF Rank #3 with a Medium risk outlook (read: 5 Market-Beating Dividend ETFs of 2020).

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