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

Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the 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

Based in Palo Alto, HP (HPQ) is in the Computer and Technology sector, and so far this year, shares have seen a price change of 4.03%. Currently paying a dividend of $0.25 per share, the company has a dividend yield of 2.55%. In comparison, the Computer - Mini computers industry's yield is 1.05%, while the S&P 500's yield is 1.29%.

Looking at 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 10.20%. 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. Right now, HP's payout ratio is 20%, which 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 2022 is $4.16 per share, representing a year-over-year earnings growth rate of 9.76%.

Bottom Line

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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