This Beaten-Down Technology Stock Offers A 6% Yield And Forward P/E Below 7x
"Appealing To Income Investors With A Higher Risk Tolerance"
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Current Price: $19.73
Dividend/Yield: $0.30/6.08%
At a time when the market continues pushing toward new highs, finding attractively priced stocks is becoming increasingly difficult.
But there’s always an opportunity somewhere.
In the case of HP Inc. (HPQ), the past five years have been disappointing. However, with a forward P/E below 7x and a dividend yield north of 6%, the investment case is hard to ignore. Especially, for income-focused investors willing to take on some risk.
While I remain cautious in the near term, I do believe HPQ could offer compelling long-term upside if management can execute.
Brief Overview 📖
HP Inc. is a well-known name in the Technology (XLK) sector, primarily focused on:
Printing (core profit driver)
Personal Systems (PCs & devices)
Corporate Investments / Other
Founded in 1939 and public since 1957, HPQ separated from Hewlett Packard Enterprise (HPE) in 2015.
Latest Earnings: A “Beat”… But Underwhelming 📊
HPQ delivered a double beat in Q1:
EPS: $0.81 (+ $0.04 beat)
Revenue: $14.4B (+ $510M beat)
But here’s the issue:
Revenue declined sequentially from $14.6B.
EPS dropped from $0.93
So yes, they beat—but momentum is still lacking.
What drove results?
Personal Systems: +11% revenue growth
Printing: -2% revenue decline (still the key segment)
Margins also slipped:
Printing: 19% → 18.3%
Personal Systems: 5.5% → 5.0%
Bottom line: modest improvements, but headwinds remain firmly in place.
The Real Problem: 5-Year Deterioration 🚧
Zooming out tells the real story.
That’s why the stock has struggled—down significantly while the S&P 500 surged. This isn’t just a bad year—it’s a multi-year deterioration trend.
Muted Growth Ahead (Through 2026) ↔️
Management isn’t exactly signaling a turnaround—yet.
2026 EPS: expected to decline ~2%
Free Cash Flow: flat (~$2.9B midpoint)
Q2 EPS guidance: $0.70–$0.76 (~10% sequential decline)
Key headwinds:
Rising DRAM & NAND costs
Margin pressure
Tariffs & inflation impacts
Expect more of the same for at least another year.
Dividend Profile: The Real Appeal 💰
Here’s where HPQ gets interesting.
Dividend Yield: >6%
Payout Ratio: ~37%
2025 FCF: $2.93B vs $1.09B dividends
Even with declining financials, the dividend is:
✔ Well-covered
✔ Sustainable (for now)
✔ Likely to grow slowly
HPQ also raised its dividend 4% recently, signaling confidence. This is not a growth story—it’s an income play.
Can AI Save the Story? 🤖
Management is betting on AI to reignite growth:
New AI-powered PCs & printers
Partnerships with Intel and Autodesk
Collaboration with OpenAI on enterprise solutions
The strategy makes sense. But execution—and timing—are everything.
Analysts expect:
Growth to return in 2027
More meaningful expansion in 2028
Valuation: Cheap… For a Reason 🏷️
Forward P/E: ~6.9x. Historical “normal” multiple: ~9.8x.
If HPQ re-rates, there’s upside.
Even compared to Dell Technologies (DELL) trading at a much higher multiple, HPQ looks discounted.
But low multiples often signal low expectations—or structural issues.
Risks to Watch ⚠️
Continued Printing segment weakness
Persistent input cost inflation
Execution risk on AI initiatives
Macro volatility (rates, tariffs, demand)
If Printing doesn’t stabilize, the stock could continue drifting lower.
Bottom Line ✅
HPQ checks a lot of boxes:
✔ Valuation
✔ High dividend yield
✔ Potential long-term upside
But…
❌ Weak long-term financial trends
❌ Limited near-term growth
❌ Ongoing margin pressure
Despite the compelling yield and low valuation, I’m maintaining a Hold rating.
I want to see:
Sustained improvement in Printing
Stabilization in margins
Clear signs of growth returning
Until then, HPQ remains: A high-yield opportunity… but one that requires patience.
Do you think HPQ can weather the storm and see long term growth? Let me know in the comments.
Just a note to let readers know I will be going paid May 1st. Be on the lookout for the article laying out the details. Feel free to provide any feedback!
Happy Investing!
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Not financial advice. For educational purposes only. I am not a licensed professional. Do your own due diligence.
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