HP (HPQ) is a Top Dividend Stock Right Now: Should You Buy?
Dividends are one of the best benefits to being a shareholder, but finding a great dividend stock is no easy task. Does HP (HPQ) have what it takes? Let's find...
All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
HP in Focus
HP (HPQ) is headquartered in Palo Alto, and is in the Computer and Technology sector. The stock has seen a price change of 53.11% since the start of the year. The personal computer and printer maker is paying out a dividend of $0.25 per share at the moment, with a dividend yield of 2.66% compared to the Computer - Mini computers industry's yield of 1.09% and the S&P 500's yield of 1.32%.
Taking a look at the company's dividend growth, its current annualized dividend of $1 is up 29% from last year. Over the last 5 years, HP has increased its dividend 5 times on a year-over-year basis for an average annual increase of 10.20%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. HP's current payout ratio is 20%. This means it paid out 20% of its trailing 12-month EPS as dividend.
HPQ is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2021 is $4.16 per share, with earnings expected to increase 9.76% from the year ago period.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. However, not all companies offer a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, HPQ is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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HP Inc. (HPQ): Free Stock Analysis Report
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