Dividend Yield: 2.2%
Last Dividend Increase: 10%, June 2013
Quick question: At the start of the year, did anyone seriously entertain the idea that Hewlett-Packard (HPQ) would have to raise its dividend just to be on par with the 10-year Treasury?
But, that’s what an 85% run in six months will do.
Realistically, this might be the first time in years shareholders aren’t at HPQ’s throat demanding more income as recompense for shoddy stock performance. So the chances of this happening in the next couple months are pretty iffy. Still, the longer-term trends aren’t good — HPQ remains 50% off its peak around $54 reached just a couple years ago, and the company still is heavily dependent on the PC world and woefully behind in mobile.
It feels like a bubble, but a little padding could help soften the pop.
HPQ’s cash flow is one of the few things that investors universally seem to appreciate about the company — even if it can’t use it properly for growth, it’ll certainly help Hewlett-Packard survive. Despite losing $12 billion in fiscal 2012, HPQ still is sitting on $13 billion in cash, and it had more than $2 billion in free cash flow in its most recent quarter — enough to pay its $283 million in quarterly dividends several times over.
Despite its run, Hewlett-Packard sure as heck doesn’t look as safe as a government guarantee. HPQ could put itself in much better shape by paying a dividend that reflected that.
Besides, which would you rather have: cash … or another disastrous acquisition?