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HP Hikes Dividend by 10%

HP Inc. (HPQ), the leading technology company operates via two divisions – printing solutions and personal systems.

The personal systems division is the bigger unit, bringing in nearly 70% of the company’s net revenues in FY 2020. This division offers notebooks, desktops and other personal workstation solutions, with notebooks driving the show as they brought in 45% of the company’s net revenues in FY 2020.

However, the smaller printing solution division, which offers printing supplies and printing hardware solutions for retail and commercial customers, is the more profitable unit.

HP’s business is quite diversified in terms of geography, with the Americas bringing in 43% of revenues, EMEA 35% and Asia Pacific region 22% in FY 2020.

Remote Work Policies Drives Up Demand

After witnessing a significant COVID-19 inflicted dip in revenues in Q2, things turned better for HP in Q3 and Q4 of FY 2020.

Despite seeing a 12% year-over-year dip in commercial revenue (within its personal systems division) in Q2 2020, HP’s consumer revenue surged by 24%, helped by 28% and 18% increases in desktop and notebook revenue, respectively. Premium consumer systems, gaming solutions and consumer accessories were the highlight.

A similar story was visible in the printing division, with consumer hardware revenue offsetting a near-equal dip in commercial hardware revenue. The commercial segment was indeed reeling under the effects of COVID-19, however, the company’s home printing offerings (including instant ink subscription) benefitted.

Earnings per share, on a diluted basis, marginally dipped in FY 2020 compared to that in FY 2019.

Free cash flow generation ability of HP remained strong, with the company generating nearly $3.8 billion in FY 2020, representing a slight dip of 2.3% from the level observed in the previous year.

HP remained aggressive in its share repurchase plan in FY 2020, having purchased nearly $3.1 billion worth of shares, up by nearly 30% from FY 2019 level. The company intends to continue repurchasing its shares in the coming quarters as well.

Given the expected continuation of remote work and online learning trends, HP’s management seems optimistic about demand for the company’s personal systems and printing solutions in the coming quarters. As a result, the management felt comfortable to raise its quarterly dividend from 17.62 cents per share to 19.38 cents per share payable to shareholders of record as of December 9, 2020.

HP continues to innovate and venture into new niches. For instance, in the 3D printing space HP sees big potential for its newly launched tool for the molded fibre packaging sector, which can find applications across food and beverage products, consumer electronics and household goods.

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