HPQ is more than just printers these days

As a dividend-growth investor, there’s not a ton to like about HP Inc. (HPQ).

The company, which sliced its dividend a few years back, has a ton of debt (154% debt/capital in the most recent quarter), a low profit margin (5.33%) and declining earnings per share (-16.33% last quarter vs. the same quarter from the previous year).

Yikes.

I typically look to invest in companies on the other end of the spectrum – low debt, high profit margins and growing EPS numbers. Somehow, though, HPQ made it into my Dividend Farm. Full disclosure, I actually own two shares of the company. They only make up 0.28% of my portfolio, but they’re there … paying dividends just like all the others.

And, despite the numbers I started this post with, I’m not all that upset about it.

HPQ may not be growing much now, but it certainly could take off in the near future. It makes nearly 60% of its money from printers and ink cartridges. The other 40% comes from PC sales. If those numbers flip-flop, though, I could see HPQ’s balance sheet smoothing out quite a bit.

Speaking of PCs … have you seen HPQ’s new laptops? The Spectre 13 and x360? They’re the latest in a series of moves that have fueled HP’s growth in the premium PC market and they look pretty nice. If the printing business stays strong and the PC business grows into something that could drive profits in the future, HPQ investors could be happy campers in the years to come.

Now might not be a bad time to buy, either. HPQ is damn near a 52-week high, but still has a P/E ratio under 15.

My two shares have jumped 11.96% since purchase. I bought the first share in April and the second in June. The earnings numbers and debt lead me to believe the company is doing the opposite of growing. The share price, though, that’s growing just fine.

The dividend isn’t terrible, either. Like I said, HPQ did cut its dividend a bit – it was paying $0.176/share each quarter at one point before I became an investor – but it has actually boosted its dividend once since I’ve owned the shares. I received a $0.27 payment Wednesday – my 12th dividend of October. The dividend bumped my October total to $7.71 and my 2017 mark to $241.72.

The current dividend yield is a decent 2.64% and the payout ratio is a pretty sustainable 38.19%.

Any other HPQ owners out there? What do you think … buy, hold or sell?

March on!

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