Computer hardware maker HP Inc (NYSE:HPQ) released its year-end numbers last week and while doing so, it also announced an increase to its dividend. At $0.2625 (payable in January), the dividend is 5% higher than the $0.25 that the company was paying previously. Over a period of five years, HP has now raised its payouts by 88%, from the $0.1393 it was paying in 2018. That averages out to a compounded annual growth rate of 13.5%.
With the increase, HP's dividend yield is now up to 3.5%, which is about double the S&P 500 average of 1.7%. Investors don't need to worry about the safety of the dividend as HP is generating more than enough in profit; for the first quarter of fiscal 2023, HP expects its diluted per-share earnings to be between $0.47 and $0.57. Even at the low end of that estimate, that would put HP's payout ratio at 56%.
Despite a tumultuous year with macroeconomic conditions weighing down demand, HP's net revenue for the year ending Oct. 31 was just under $63 billion, which was less than a 1% change from the previous year. Operating profits of $4.7 billion were down 12% as the company did incur greater expenses.
HP plans to improve its financials through an initiative called the, "Future Ready Transformation plan," where it will make "significant structural cost savings through digital transformation, portfolio optimization and operational efficiency." By the end of fiscal 2025, it projects that it will achieve annualized cost savings of at least $1.4 billion.
Year to date, shares of HP are down 20%.
