Hewlett Packard Enterprise (NYSE:HPE) Is Due To Pay A Dividend Of $0.12

Hewlett Packard Enterprise Company (NYSE:HPE) will pay a dividend of $0.12 on the 14th of July. This means the annual payment is 3.1% of the current stock price, which is above the average for the industry.

View our latest analysis for Hewlett Packard Enterprise

Hewlett Packard Enterprise's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by Hewlett Packard Enterprise's earnings. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 134.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 30%, which is in the range that makes us comfortable with the sustainability of the dividend.

Hewlett Packard Enterprise Is Still Building Its Track Record

Hewlett Packard Enterprise's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2016, the dividend has gone from $0.22 total annually to $0.48. This means that it has been growing its distributions at 12% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Hewlett Packard Enterprise's earnings per share has shrunk at 16% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

Our Thoughts On Hewlett Packard Enterprise's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 5 warning signs for Hewlett Packard Enterprise that investors should know about before committing capital to this stock. 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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