HPE: Dividend Hike, Buybacks Impress Shareholders

Hewlett Packard Enterprise (HPE) has been regularly rewarding shareholders through dividends and share buybacks. The company, which, along with HP (HPQ) was split from Hewlett Packard Company in 2015, has a strong cash flow.

This week, HPE reported its fiscal 2019 fourth-quarter earnings. In the quarter ended October 31, its cash flow from operations rose by $106 million to $1.4 billion. Meanwhile, its FCF (free cash flow) fell by $154 million to $878 million. That figure accounts for a one-time arbitration payment of $668 million to DXC.

In fiscal 2019, the company’s operating cash flow rose over 35% YoY (year-over-year) to $4.0 billion, and its FCF grew 58% YoY to $1.7 billion. HPE’s higher profits and improved working capital management boosted its FCF. In fiscal 2020, the company expects its FCF to grow to $1.9 billion–$2.1 billion.

In the fourth quarter, the company’s cash and cash equivalents fell YoY to $3.78 billion from $4.89 billion, and its long-term debt declined YoY to $9.4 billion from $10.1 billion.

HPE consistently rewards shareholders

In fiscal 2019, the company returned nearly $2.9 billion to shareholders in the form of share repurchases and dividends. The payment completed the $7 billion share buyback program the company committed to in fiscal 2018, when it bought back $4.1 billion in stock. HPE returned around $3 billion to shareholders in fiscal 2017 and $3.1 billion in fiscal 2016.

During fiscal 2019’s fourth quarter, HPE returned $431 million to shareholders, repurchasing $284 million in stock and paying $147 million in dividends.

Share repurchases boosted the company’s fourth-quarter EPS by reducing its share count. Margin growth also supported its earnings. In Q4, HPE’s adjusted EPS grew 14% YoY to $0.49. However, its revenue fell 9% YoY due to currency headwinds and lower server demand.

HPE is a dividend-paying stock

The hardware company announced a dividend hike of about 7% in the fourth quarter, raising its quarterly dividend to $0.12 per share from $0.1125. As of yesterday, HPE’s had an annual dividend of $0.48, a dividend yield of 3.01%, and a dividend payout ratio of 27.51%. In fiscal 2018, HPE’s dividend per share rose YoY to $0.4875 from $0.2600.

In comparison, Juniper Networks (JNPR), NetApp (NTAP), Cisco Systems (CSCO), and HPQ have dividend yields of 3.01%, 3.17%, 3.09%, and 3.56%, respectively. Cisco, which has also been rewarding shareholders with dividend hikes and share buybacks, has increased its dividend payout for the last eight years.

Stock performance

HPE stock fell 0.19% on November 27 and closed at $15.94, with a market capitalization of around $20.6 billion. The stock closed 9.4% below its 52-week high of $17.59, and 31.8% above its 52-week low of $12.09.

Year-to-date, HPE stock had risen around 23.4% as of November 27. In comparison, the S&P 500 had gained around 25.8%.