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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor’s dream. 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
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 30.91% since the start of the year. The personal computer and printer maker is paying out a dividend of $0.19 per share at the moment, with a dividend yield of 2.41% compared to the Computer – Mini computers industry’s yield of 1.51% and the S&P 500’s yield of 1.33%.
Looking at dividend growth, the company’s current annualized dividend of $0.78 is up 0.6% from last year. HP has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 10.20%. Looking ahead, future dividend growth will be dependent on earnings growth and 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 22%. This means it paid out 22% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for HPQ for this fiscal year. The Zacks Consensus Estimate for 2021 is $4.03 per share, representing a year-over-year earnings growth rate of 6.33%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It’s important to keep in mind that not all companies provide 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. 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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