HP’s dividend just got a big hike. The stock is rising.
surged late Wednesday after the company sharply increased its dividend and presented bullish outlook for its next fiscal year.
In a virtual analyst day with investors – the company’s first since 2019 – CFO Marie Myers said that HP (ticker: HPQ) is increasing its annual dividend to $ 1 per share, increasing the yield about 3.3%. It is against a payment of 78 cents.
The company now expects adjusted non-GAAP earnings of $ 4.07 to $ 4.27 per share for fiscal 2021, which ends this month. That’s well above the Wall Street consensus of $ 3.78 per share, and around $ 3.72 per share. The bullish outlook is due in part to aggressive HP share buyback activity.
HP shares rallied during much of the pandemic, as consumers furiously bought new PCs for education and remote work. But investors have since worried about spike in demand for PCs and what will follow for the company; the stock is down 20% from its peak in May.
HP responded to some of those concerns on Wednesday, noting that the company remains in a better position after the pandemic, with increased profitability in the years to come.
HP’s bullish outlook comes despite the company expecting supply to its printers and computers to be limited at least in the first half of fiscal 2022.
Myers said HP expects to return 100% or more of free cash flow to shareholders in the form of buybacks or dividends over time, unless the company sees higher-return investment opportunities.
From a longer-term perspective, HP expects that each year Revenue growth in the range of 2% to 4%, with earnings growth on a compound basis of at least 8% over the next three years. Myers said the company expects the company’s PC and printer business to grow roughly in line with the market.
Myers says she expects operating profit margins of 5-7% for PCs going forward, slightly higher than the company’s previous forecast, with printing margins ranging between 16 and 18%. She said the company expects to increase its dividend rate over time based on earnings growth.
For fiscal 2022, the company has combined revenue of more than $ 10 billion in five fast-growing areas: games, peripherals, instant ink, industrial graphics, and 3D and workforce solutions. All five are expected to experience double-digit growth in fiscal 2022.
In a conversation with reporters ahead of the analysts session, HP CEO Enrique Lores noted that the company is much stronger than it was in 2019, when it held its final day of ‘analysts.
In the past four quarters, he said, HP has grown 6% compared to the same period two years ago, before the pandemic. He cited a 29% improvement in non-GAAP operating profit, 60% non-GAAP profit growth and 13% higher free cash flow.
Lores said that in its personal systems business, the company focuses on both gaming and commercial PCs. He says HP now has more than $ 2 billion in annualized revenue from gaming PCs and associated peripherals.
The total addressable personal systems market is roughly $ 200 billion higher than the company forecast in 2019, Lores added, noting an expanded PC market thanks to the pandemic and greater opportunity in both peripherals and devices. Services. HP now estimates the total addressable PC market at $ 560 billion, including $ 110 billion in peripherals, $ 120 billion in services, and $ 330 billion in PCs.
In another new disclosure, Lores says that HP now generates around $ 500 million per year from its Instant Ink printer subscription services, with growth north of 30%. He said the company plans to expand Instant Ink from the mainstream market to the small and medium-sized business market, covering multiple printers and not just individual printer units. And he also revealed that the company now has a roughly $ 2 billion industrial graphics business.
HP shares are up 3.7% after-hours Wednesday trading, to $ 29.65.
Write to Eric J. Savitz at email@example.com