Updated 3/6/25
CDW Corporation has carved out a solid position as a key provider of IT solutions, working with businesses, government agencies, healthcare organizations, and schools. The company has a strong reputation for delivering technology products and services that help organizations stay competitive in an increasingly digital world. Over the years, CDW has developed a business model that thrives on recurring revenue and long-term customer relationships.
However, recent stock price declines have raised questions among investors. With shares down significantly from their highs, the real question for dividend investors is whether CDW remains a reliable income-generating stock. Let’s take a closer look at its dividend metrics and financial health to see where it stands.
Key Dividend Metrics
📈 Dividend Yield – 1.49%
💰 Annual Dividend – $2.50 per share
📅 Next Dividend Date – March 11, 2025
🔄 5-Year Dividend Growth – Consistently increasing
📊 Payout Ratio – 31.18% (Well-covered)
📉 Stock Decline from 52-Week High – -32.54%
🛠 Dividend Safety – Supported by strong cash flow
Dividend Overview
CDW has been a steady dividend payer, rewarding shareholders with consistent increases over the years. While the current yield of 1.49% isn’t the highest in the market, the real strength lies in its ability to grow that payout over time.
With a payout ratio of just over 31%, the dividend remains well-covered by earnings. This means the company isn’t stretching itself thin to pay shareholders, leaving plenty of room for future increases. The next dividend payment is scheduled for March 11, reinforcing CDW’s ongoing commitment to returning value to investors.
For those who prioritize dividend growth over high initial yields, CDW’s track record makes it a compelling option.
Dividend Growth and Safety
A growing dividend is often more valuable than a high but stagnant one, and CDW has been reliable in this regard. Over the past five years, the company has steadily increased its payouts, making it a strong choice for long-term investors who want rising income over time.
Several factors support the safety of CDW’s dividend:
- The company generates over $1.28 billion in operating cash flow, ensuring it has plenty of liquidity to support future dividend hikes.
- A payout ratio of 31.18% means it is using only a small portion of its earnings to pay dividends, keeping it sustainable.
- CDW operates in an industry where IT spending remains a necessity, providing a level of business stability even during economic downturns.
One point to watch is the company’s debt level, which is quite high at $6.38 billion. While the strong cash flow helps offset this risk, a heavily leveraged balance sheet can limit financial flexibility in challenging times.
Chart Analysis
Overall Trend
CDW’s stock has been in a clear downtrend, with lower highs and lower lows forming over the past several months. The price has dropped significantly from its highs earlier in the year, with no strong signs of a reversal yet. The most recent closing price of 167.22 is right near the 52-week low, showing that selling pressure remains dominant.
Moving Averages
The 50-day moving average (orange line) has been trending downward for quite some time, staying below the 200-day moving average (blue line). This bearish crossover, often called a “death cross,” occurred months ago and has continued to signal weakness in the stock. The 200-day moving average is also sloping downward, reinforcing the long-term negative trend.
More recently, the stock attempted a short-term bounce in February but failed to reclaim the 50-day moving average. Instead, it rolled over and continued its descent, indicating that sellers remain in control.
Volume Analysis
Trading volume has fluctuated, with notable spikes on certain days, particularly during periods of sharp price drops. The volume bars show increased selling activity on declines, which suggests institutional selling rather than retail-driven fluctuations. Buyers have stepped in occasionally to provide temporary support, but no sustained accumulation pattern is evident yet.
Relative Strength Index (RSI)
The RSI indicator at the bottom of the chart has been stuck in a low range, currently sitting well below 30. This level signals that the stock is in oversold territory, which sometimes precedes a short-term bounce. However, RSI alone isn’t enough to confirm a reversal, as stocks can remain oversold for extended periods during strong downtrends.
Recent Candlestick Patterns
The last five candles reflect continued weakness, with small-bodied candles and little evidence of strong buying pressure. Wicks on the top of several candles indicate that attempts to move higher have been met with selling resistance. The most recent candle closed near the day’s low, reinforcing bearish momentum.
Support and Resistance
The stock is currently sitting on a key support level around 167. A break below this area could trigger further downside, potentially leading to another leg lower. On the upside, the first resistance level would be the 50-day moving average, which would need to be reclaimed before any meaningful recovery can take shape.
Analyst Ratings
📊 Upgrades:
🔼 Northcoast Research – Upgraded CDW from Neutral to Buy on June 7, 2024, with a price target of $270. Analysts highlighted CDW’s strong positioning in the IT solutions market and its potential for long-term revenue growth. The firm cited improving demand trends and solid execution as key reasons for the upgrade.
🔼 Redburn Atlantic – Initiated coverage on November 15, 2024, with a Buy rating and a price target of $230. The firm expressed confidence in CDW’s ability to navigate shifting enterprise IT spending patterns while maintaining profitability.
📉 Downgrades:
🔽 Citigroup – Downgraded CDW from Buy to Neutral on October 1, 2024, adjusting the price target from $250 to $245. Analysts pointed to concerns over economic uncertainty and potential slowdowns in corporate IT spending, which could impact CDW’s near-term revenue growth.
🔽 JPMorgan Chase & Co. – Adjusted its stance on CDW from Overweight to Neutral on October 28, 2024, lowering the price target from $260 to $235. The downgrade was driven by valuation concerns, as well as caution regarding IT infrastructure spending trends. Analysts believe the stock’s recent rally had priced in much of its expected upside.
💰 Consensus Price Target:
The current 12-month average price target for CDW stands at $242.67, indicating potential upside from recent trading levels. This figure is based on multiple analyst projections, offering a balanced view of where the stock could be headed.
Recent ratings suggest a split sentiment among analysts, with some seeing continued growth potential while others urge caution due to external market factors. Investors watching CDW should weigh these perspectives carefully while considering broader trends in the tech and IT services industry.
Earning Report Summary
CDW recently shared its latest earnings report, giving investors a look at how the company performed over the past quarter and the full year. The numbers tell a story of steady demand, some profitability challenges, and a company that’s staying strong despite market shifts.
Quarterly Performance Highlights
Revenue for the fourth quarter came in at $5.19 billion, up 3.3% from the same time last year. That’s a solid increase, showing that businesses are still investing in IT solutions. However, gross profit didn’t see the same kind of growth, staying close to where it was last year at $1.15 billion. The margin dipped slightly to 22.3%, which suggests costs may be creeping up.
Net income for the quarter dropped to $264.2 million, down from $296.1 million a year ago. That’s a 10.8% decline, which also showed up in earnings per share—coming in at $1.97 versus $2.18 last year. While the company is still profitable, it’s clear that rising expenses or shifts in spending patterns are putting some pressure on the bottom line.
Looking at the Full Year
For all of 2024, CDW brought in $20.99 billion in revenue, just a small decline of 1.8% compared to 2023. Given how unpredictable the economy has been, maintaining nearly flat revenue is still a decent outcome. Gross profit held steady at $4.6 billion, and net income came in at $1.08 billion, slightly lower than the prior year.
Earnings per share for the full year were $7.97, just under last year’s $8.10, showing that while the company isn’t losing its footing, it’s not seeing major earnings growth either.
Breaking Down the Business Segments
Not all parts of CDW’s business performed the same. The corporate segment, which brings in a big chunk of revenue, saw sales slip by 2.2% to $2.2 billion in Q4. Small business customers pulled back even more, with sales down 3.4% to $383 million. The public sector segment also saw a slowdown, dropping 5.2% to $1.87 billion.
The one bright spot was CDW’s “other” category, which shot up 52.6% to $730 million. That’s likely tied to acquisitions and new growth areas, showing that while some traditional revenue streams are softening, the company is finding other ways to expand.
Cash Flow, Dividends, and Buybacks
One area where CDW remains strong is cash flow. The company pulled in $1.28 billion in operating cash flow over the past year, a reassuring sign that it can cover its expenses, reinvest in the business, and still reward shareholders.
Speaking of shareholders, CDW kept its quarterly dividend at $0.625 per share, a steady payout that reflects confidence in its financial health. On top of that, the company added another $750 million to its share buyback program, signaling that leadership sees value in its own stock at these levels.
Looking Ahead
While the earnings report shows some slowing in certain areas, CDW isn’t sitting still. The company continues to focus on IT solutions that businesses and organizations need, even in a more cautious spending environment. The key going forward will be balancing growth with cost control and making sure the business stays competitive in a shifting market.
Financial Health and Stability
CDW’s financials paint a mixed picture. On one hand, revenue growth remains steady, with the company generating $21 billion over the past year and posting a 3.3% year-over-year revenue increase. On the other hand, quarterly earnings declined by 10.8%, suggesting potential margin pressure.
Here’s a closer look at some key financial metrics:
- Profit margin sits at 5.13%, while operating margin stands at 8.19%, both healthy figures for a company in this space.
- Return on equity is an eye-popping 49.04%, though this is inflated by high leverage.
- The current ratio of 1.35 indicates CDW has enough liquidity to cover short-term obligations.
The biggest concern here is the debt load. A debt-to-equity ratio of 271.15% is quite high, meaning CDW relies heavily on borrowed money. While it has strong cash flow to support these obligations, investors should keep an eye on how the company manages its leverage moving forward.
Valuation and Stock Performance
CDW’s stock has taken a hit, falling more than 32% from its 52-week high. This decline has made the stock more attractively valued, at least on a relative basis.
- The price-to-earnings (P/E) ratio is currently 20.99 on a trailing basis and 17.15 on a forward basis, making it more reasonably priced compared to historical levels.
- The price-to-sales ratio is 1.08, suggesting that investors aren’t paying a huge premium for each dollar of revenue.
- The stock is trading below both its 50-day ($185.77) and 200-day ($206.32) moving averages, which indicates downward momentum.
With the stock hovering near its 52-week low of $167.12, some investors might see an opportunity to buy at a discount. However, the recent earnings decline raises questions about whether the lower valuation is justified.
Risks and Considerations
No stock is without risk, and CDW is no exception. A few factors stand out as potential concerns:
1️⃣ High debt levels – With a debt-to-equity ratio above 270%, CDW’s leverage is something to watch. If borrowing costs rise or the company faces earnings pressure, debt repayment could become a bigger issue.
2️⃣ IT spending cycles – CDW’s revenue depends on business and government IT budgets, which can fluctuate. A slowdown in corporate IT spending could impact the company’s growth.
3️⃣ Stock volatility – The stock has seen big swings, and with its recent decline, it could experience more turbulence before stabilizing.
4️⃣ Earnings pressure – The 10.8% drop in quarterly earnings raises concerns about whether the company can maintain its growth trajectory.
5️⃣ High institutional ownership – Nearly 96.45% of shares are held by institutions, meaning large fund movements could create volatility in the stock price.
Final Thoughts
For investors focused on dividend growth rather than high immediate yield, CDW remains an interesting option. The company has a solid history of increasing its dividend, supported by strong cash flow and a manageable payout ratio. However, the high debt levels and recent earnings decline introduce some uncertainty.
With the stock near its 52-week low, it could present an opportunity for long-term investors who believe in CDW’s ability to rebound. However, it’s important to keep an eye on earnings trends and debt management to ensure that the company maintains its financial strength.
For those willing to ride out some volatility, CDW’s commitment to dividend growth and strong cash flow generation make it a stock worth considering.
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