In order to boost shareholder value, Hewlett-Packard Company HPQ hiked its quarterly dividend by approximately 10% to 17.6 cents per share from the prior payout of 16 cents. The dividend is payable on Apr 1, 2015 to shareholders of record at the close of business on Mar 11, 2015.

This brings the annualized dividend to 70.4 cents per share. The hike reflects the company’s confidence in its prime asset portfolio and its intention to share the benefits with its shareholders.

Hewlett-Packard has a history of raising dividends. The company has been increasing its quarterly dividends consistently over the last 50 years. The company started paying 0.078 cents per share as quarterly dividend in fiscal 1965, which has been raised every year to reach the present amount of 17.6 cents. The dividend hike reflects the financial strength of the company.

During the recently concluded first quarter, Hewlett-Packard spent $1.57 billion on share repurchases and $304 million on dividends. We believe that continuous share buybacks and the hike in dividend will inspire investor loyalty through higher returns from the stock.

Hewlett-Packard’s strong balance sheet and cash flow provide it with the financial flexibility to undertake shareholder-friendly initiatives as well as scope for product innovation and expansion in newer markets. The company generated operating cash flow of $744 million in the first quarter of fiscal 2015 and ended the period with cash and cash equivalents of nearly $12.92 billion. We remain encouraged by Hewlett-Packard’s strong cash position and its ability to service its long-term debts.

The company’s plan to split into two companies is expected to be completed by this year end. The business-oriented company will be called Hewlett-Packard Enterprise, and the PC company will be called HP Inc. The two new companies are predicted to make roughly $50 billion revenues each annually.

Some other companies which have a consistent track record of returning value through share repurchases and dividend payments include Yahoo! Inc. YHOO, SanDisk Corporation SNDK and Accenture plc ACN.

We believe that such initiatives not only enhance shareholder return but also raise the market value of the share. Through dividend payouts, companies bolster investors’ confidence, persuading them to either buy or hold the scrip. Looking ahead, Hewlett-Packard remains confident of its growth potential, thereby raising hopes for a further increase in shareholder value.

Hewlett-Packard currently carries a Zacks Rank #3 (Hold).

 

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