Our top conservative idea for 2015 is one of the globe’s great iconic companies with a long history of innovation and—when necessary—the ability to adapt and reinvent itself, explains Kelley Wright, editor of Investment Quality Trends.

In fact, over its more than 100-year history, International Business Machines (IBM) has perhaps reinvented itself more times than any other company. 

Historically, this ability to adapt and change has allowed IBM to prosper, which is reflected in its earnings and stock price.

According to its dividend-yield profile, IBM offers good value when its dividend-yield is 2.60%. Based on the current dividend of $4.40 per share, a 2.60% dividend-yield is realized at prices below $169 per share.

According to our work, the historically repetitive area of Overvalue for IBM is a dividend-yield of 1.30%, which would be realized at $338 per share. Accordingly, the upside potential to Overvalue for IBM is over 110%.

The company has a history of increasing its dividend on average at least 10% per year for the last 12 years.

If IBM adheres to this schedule, another increase would come this summer, which would raise the price at which Undervalue and Overvalue dividend yields are realized.

With a current payout ratio of 27%, IBM certainly has room to increase what it pays out to shareholders.

Although earnings have declined year-over-year due to a change in product mix, it is not unreasonable to project that earnings will reach $20 per share in the next couple of years, about a 23% increase from the current $16.26 per share.

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