Though it’s not as much of an increase as some pundits had hoped for, the HP Enterprise (NYSE: HPE) board of directors has authorized a $0.01 a share quarterly dividend hike. Based on the current price, the 18% increase would bring the yield to 1.1%, up from 0.96% before the adjustment. The dividend will be paid on or near Jan. 4 to shareholders of record as of Dec. 14.
Though not a significant increase, it could be a precursor of future hikes. Following its split from what is now HP Inc., HP Enterprise has quietly gone about generating strong cash flow from operations, which in turn has helped it increase cash and equivalents by over $900 million year-over-year to $10.74 billion.
As margins continue to increase — another initiative HP Enterprise is delivering on — its cash position should continue to strengthen. That, combined with its pending spin-off and merger deal with Computer Sciences Corp. (NYSE: CSC) and U.K.-based Micro Focus (NASDAQOTH: MCFUF), will also have a positive impact on HP Enterprise’s already sound balance sheet.
In addition to the obvious cost savings those deals will bring, and its increased focus on higher-margin cloud Infrastructure-as-a-Service (IaaS) and related businesses, HP Enterprise shareholders will receive a 50% ownership stake in the two “new” companies. HP Enterprise will also pocket a $2.5 billion check from Micro Focus, adding even more to its coffers.
HP Enterprise will likely keep looking for niche players it can acquire to expand its core offerings, but considering its strong — and getting stronger — cash position, giving more money back to shareholders is the right move.
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Tim Brugger has no position in any stocks mentioned.
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