Assembling Computers for Dividends. HPQ

Not all dividend companies need to be high growers. Stable dividends payers are also good. If you are generating a lot of cash to be paid out on dividends, this is good too.

Recently, HP split into HPQ and HPE. They left the slowing down computer and printer sales in HP (HPQ). While HPE maybe the faster growing part of the business, they only have a yield of about 1% and are a relatively new company, even though they existed with HP (HPQ). There are other companies that have existed longer with high growth and low dividend yield. We are investing in HP (HPQ) as a slow cash cow.

Currently, they are yielding 4.9% and have been paying an increasing dividend for 6 years, which is a start. While computer and printer will show down even more, there is not much cost in assembling computers and selling them, such as a giant R&D department. Many of our other investments have a ton of potential for capital appreciation (stock price going up), and this has very little at the moment. But that is ok. Our goal is a lot of dividend. We believe in diversification, and having a cash cow to pay good dividend is good to have mixed with high fast growers.

We do not want a business that might not exist in five years, because they will be replaced with a new technology or a competitor crushing them, like Blockbuster videos with the internet. While we can see computer sales going down with smart phone and tablets sales, we do not see this replacing all uses. I uses tablets and my smart phones, but if I want to use Excel or a CAD program, I use my computer. And a lot of the work I do cannot be replaced with a smart phone. It is much easier writing a 3,000 Word document on a computer with my dozen internet tabs open, Excel files, other Word documents, and a Power Point presentations.

HP (HPQ) is also working on their high-end notebooks with 4K touch screens. They are also looks to be developing 3D printer and a smart phone. This shows that they are just waiting for the end, but working on related products to keep sales going. This will allow to expand in related areas, as I would want in a company. Without having to compete with the other half of their business for resources, such as management attention, R&D, marketing, etc. it will allow them to grow.

With a current payout ratio of about 30%, the dividend is safe to start and to grow. We bought 28 shares for $291.73 including those computers calculated commissions. To start, we will get paid $14 a year. While we do not expect this to be a high grower, but we expect these assembled computers to return our money very well with dividends.

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2 thoughts on “Assembling Computers for Dividends. HPQ

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