The board of Hewlett Packard Enterprise Company (NYSE:HPE) has announced that it will pay a dividend on the 7th of October, with investors receiving $0.12 per share. Based on this payment, the dividend yield on the company's stock will be 3.6%, which is an attractive boost to shareholder returns.
Hewlett Packard Enterprise's Earnings Easily Cover The Distributions
If the payments aren't sustainable, a high yield for a few years won't matter that much. However, Hewlett Packard Enterprise's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.
Over the next year, EPS is forecast to fall by 48.3%. If the dividend continues along recent trends, we estimate the payout ratio could be 38%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
Hewlett Packard Enterprise Doesn't Have A Long Payment History
It is great to see that Hewlett Packard Enterprise has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2015, the annual payment back then was $0.22, compared to the most recent full-year payment of $0.48. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Hewlett Packard Enterprise has grown earnings per share at 99% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.
We Really Like Hewlett Packard Enterprise's Dividend
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All of these factors considered, we think this has solid potential as a dividend stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 4 warning signs for Hewlett Packard Enterprise (of which 2 are concerning!) you should know about. Is Hewlett Packard Enterprise not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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