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Hewlett Packard Enterprise’s Upward Sloping Dividend Yield Curve

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Revenue and EPS performance

Hewlett Packard Enterprise (HPE) recorded a 4.0% fall in net revenue growth in 2016 compared to 6.0% in 2015. Its Enterprise Group, Enterprise Services, Software, Financial Services, and Corporate Investments segments drove the fall. Enterprise Group was the only segment to note some growth in 2015. The company noted a fall in contributions from the United States, the United Kingdom, and other countries. A 7.3% fall was registered in the first nine months of 2017, driven by every segment and offset by Financial Services.

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A 36.0% rise in EPS (earnings per share) was observed in 2016 compared to 49.0% in 2015. Gains on divestitures, lower costs and expenses, and share buybacks drove the 2016 rise in EPS. Lower costs and expenses also drove the 2015 rise in EPS. Interest expenses rose in 2016 after falling in 2015. Slower revenue growth and higher costs and expenses, including interest expenses, drove the 107.0% fall in EPS for the first nine months of 2017. The company has maintained a very good free cash flow balance. Its free cash flow fell in 2015 but revived in 2016.

Dividend trajectory

HPE saw an upward sloping dividend yield curve between 2016 and 2017 due to growth in dividends, which offset the impact of price gains.

The company has a dividend yield of 1.8%, and its prices have risen 10.1% on a YTD (year-to-date) basis. That compares to a dividend yield of 2.3% and a YTD price gain of 15.2% for the Dow Jones Industrial Average (DJIA-INDEX) (DIA). The S&P 500 (SPX-INDEX) (SPY) has a dividend yield of 2.3% and a YTD price gain of 13.6%. The Nasdaq Composite (COMP-INDEX) (ONEQ) has a YTD price gain of 22.2%.

The First Trust NASDAQ Technology Dividend ETF (TDIV) is a dividend ETF with exposure to Hewlett Packard Enterprise. The ETF has a 2.3% dividend yield and a PE (price-to-earnings) ratio of 18.0x. The First Trust NASDAQ Rising Dividend Achievers ETF (RDVY) is a dividend ETF with exposure to Hewlett Packard Enterprise. The ETF has a 1.2% dividend yield and a PE ratio of 15.7x.

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