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HP (HPQ) is a Top Dividend Stock Right Now: Should You Buy?

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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.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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

Headquartered in Palo Alto, HP (HPQ - Free Report) is a Computer and Technology stock that has seen a price change of -0.9% so far this 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 2.68% compared to the Computer - Mini computers industry's yield of 1.08% and the S&P 500's yield of 1.42%.

In terms of dividend growth, the company's 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 10.02%. 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. Right now, HP's payout ratio is 20%, which means it paid out 20% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, HPQ expects solid earnings growth. The Zacks Consensus Estimate for 2022 is $4.16 per share, representing a year-over-year earnings growth rate of 9.76%.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers 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 presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).


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