Readers hoping to buy Hewlett Packard Enterprise Company (NYSE:HPE) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Investors can purchase shares before the 10th of September in order to be eligible for this dividend, which will be paid on the 2nd of October.
Hewlett Packard Enterprise's next dividend payment will be US$0.11 per share, on the back of last year when the company paid a total of US$0.45 to shareholders. Last year's total dividend payments show that Hewlett Packard Enterprise has a trailing yield of 3.3% on the current share price of $13.75. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Hewlett Packard Enterprise has been able to grow its dividends, or if the dividend might be cut.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Hewlett Packard Enterprise's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Over the last year it paid out 69% of its free cash flow as dividends, within the usual range for most companies.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Hewlett Packard Enterprise reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 4 years, Hewlett Packard Enterprise has lifted its dividend by approximately 20% a year on average.
Remember, you can always get a snapshot of Hewlett Packard Enterprise's financial health, by checking our visualisation of its financial health, here.
Has Hewlett Packard Enterprise got what it takes to maintain its dividend payments? It's hard to get used to Hewlett Packard Enterprise paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.
Wondering what the future holds for Hewlett Packard Enterprise? See what the 21 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.