HP (NYSE: HPQ) is a household name, as almost every household has, or has at one time or another, an HP computer, laptop, or printer. But the stock has struggled recently, trading down about 34% over the past 12 months and about 13% year-to-date.
Poor revenue and flat revenue have led to several recent revenue losses for HP. While PC sales are strong, HP has seen a decline in printer sales as people go digital.
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In addition, HP has faced higher costs, in part due to component tariffs, shifting production to lower-tariff regions, and increased costs for memory components.
Due to the high demand for memory from artificial intelligence (AI), memory makes up a larger share of computer builds than in the past, about 35%, double what it was just a few quarters ago. In addition, the cost of memory components has increased due to a decrease in demand and supply.
Together, these factors have increased costs for HP and are a drag on revenues. They have caused the company to project revenue at the lower end of its guidance range for this fiscal year.
These factors have troubled not only investors in HP, but also Wall Street analysts. The stock has an average price target of $19 per share, which is essentially where it is now. In addition, some 32% of analysts say “sell”, versus only 21% who rate it as a buy.
But there are several reasons why most analysts may be wrong. For starters, the stock is very cheap, trading at just 7 times earnings and 6 times forward earnings.
Second, HP is an elite dividend stock. It yields a whopping 6.2%, which is about as high a yield as you’ll find with any entity that isn’t a real estate investment trust (REIT) or business development company (BDC). It is also a consistent dividend payer, increasing its dividend every year for 15 consecutive years. In addition, it has an excellent payout ratio of 36%, so it is not stretched to fund its dividend.
In this difficult market environment, where many stocks are overvalued, the dividend alone would be a good reason to buy HP stock. But I also think that HP’s earnings will increase by the end of 2026 to 2027. Among the reasons, HP announced late last year that it plans to cut costs by nearly $1 billion by the end of fiscal 2028, saving about $250 million in fiscal 2026.
