Hewlett Packard Enterprise (NYSE:HPE) Has Announced A Dividend Of $0.12

The board of Hewlett Packard Enterprise Company (NYSE:HPE) has announced that it will pay a dividend of $0.12 per share on the 13th of January. This means the annual payment is 2.9% of the current stock price, which is above the average for the industry.

Check out the opportunities and risks within the US Tech industry.

Hewlett Packard Enterprise's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last payment made up 72% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.

The next year is set to see EPS grow by 180.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 29%, which is in the range that makes us comfortable with the sustainability of the dividend.

Hewlett Packard Enterprise Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 7 years of history we want to see a few more years of history before making any solid conclusions. The dividend has gone from an annual total of $0.22 in 2015 to the most recent total annual payment of $0.48. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Hewlett Packard Enterprise has grown earnings per share at 21% per year over the past five years. EPS is growing rapidly, although the company is also paying out a large portion of its profits as dividends. If earnings keep growing, the dividend may be sustainable, but generally we'd prefer to see a fast growing company reinvest in further growth.

Hewlett Packard Enterprise Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Hewlett Packard Enterprise might even raise payments in the future. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 4 warning signs for Hewlett Packard Enterprise that investors need to be conscious of moving forward. Is Hewlett Packard Enterprise not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.