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Will HP’s Profit Margins and Dividend Yield Improve in Fiscal 2018?

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Feb. 14 2018, Published 11:10 a.m. ET

Operating margin expected to reach 7.6%

Analysts expect HP’s (HPQ) net margin to be 5.5% and its operating margin to be 7.6% in fiscal 2018. HP recorded a net margin of 4.9% with an operating margin of 7.5% in fiscal 2017. HP’s profit margin is expected to rise further in fiscal 2019 and 2020 driven by HP’s focus on improving its operational efficiency.

HP’s net margin and operating margin are expected to rise to 5.6% and 7.7%, respectively, in fiscal 2019. Its net margin and its operating margin are expected to rise to 5.8% and 7.8%, respectively, in 2020 compared to its revenue growth of almost 4% YoY (year-over-year). In the previous part of this series, we learned that HP’s EPS (earnings per share) are expected to rise at a higher rate than its rise in revenue.

Peer companies Apple (AAPL), Microsoft (MSFT), and China’s (FXI) Lenovo (LNVGY) reported net margins of 21.1%, 22%, and 1.3%, respectively, in their last reported fiscal years.

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Dividend yield

Another way that a company improves its shareholder value is by paying dividends. HP has a dividend yield of 2.7%, or an annualized payout of $0.56 per share. HP’s dividend payout ratio stands at 30.8%. Comparatively, Apple’s and Microsoft’s dividend yields stand at 1.6% and 1.9%, respectively.

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