Tech Giant in a Tough Year, But the 4.5% Yield Is Hard to Ignore

HP Inc. (NYSE: HPQ) isn’t the kind of stock that sparks excitement in the AI-driven frenzy of 2025. Down over 30% in the past year, it’s easy to see why the market has soured.

Slowing PC demand, tariffs, and macro headwinds have clouded the outlook. But there is something to look at.

Behind the slump is a company that still throws off strong cash flow, is aggressively repositioning for the future, and yields 4.5% while you wait.

This is the kind of stock income-focused investors should be watching closely, not because it’s hot, but because it’s deeply discounted. More on that below.

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Action Plan: Capture the Income While It Lasts

• Accumulate shares near $24–$26, securing a high starting yield of 4.5%, well above the tech sector average.

• Use a DRIP (Dividend Reinvestment Plan) to slowly average down and boost your yield on cost over time.

• Track HP’s quarterly cash flow and payout ratio, not just EPS, to evaluate the sustainability of dividends.

The dividend is no fluke. HP declared its fourth quarterly payout of $0.2894 per share for fiscal 2025, annualizing to $1.1576 per share.

That translates to a 4.55% yield, one of the best in large-cap tech. And with a P/E under 10x, you’re not paying up for this cash stream.

HP’s payout ratio remains manageable.

Operating cash flow has stayed steady, and management has maintained dividends even as buybacks have been trimmed.

It is clear that income is a priority.

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Why HP Deserves a Second Look

The headlines are ugly, but zoom out. HP is in the middle of a multi-year transformation to become a leaner, more resilient manufacturer.

The Future Ready plan aims to deliver $2 billion in annualized savings, partly through supply chain relocation and AI-led productivity gains.

As of mid-2025, over 90% of U.S.-bound HP products are manufactured outside China, important in light of worsening U.S.-China tariffs.

That alone helps mitigate long-term risks and makes HP less vulnerable to trade policy shocks.

And while revenue growth remains modest, HP’s strategic focus on hybrid work, industrial printing, and managed services is building a base of recurring cash flow that supports the dividend.

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CEO Enrique Lores has made clear that HP is modernizing operations.

With internal AI tools deployed across customer service, supply chain, and forecasting, HP is pushing for efficiency across the board.

Evercore’s recent update after an investor call highlighted progress, and AI and automation are driving results faster than expected.

Analyst Amit Daryanani reiterated a Buy rating and $29 target, arguing that HP now has the flexibility to maintain margin stability even if topline growth is slow.

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Don’t Ignore the Valuation Story

We need to be clear about something, though. HP isn’t growing like Nvidia or Microsoft. But it doesn’t need to.

At just 9.8x earnings and yielding 4.5%, HP is priced like a company in decline, even though it continues to generate over $4 billion in annual free cash flow.

The current price of ~$25 is near the bottom of its 52-week range, with analyst targets ranging from $29 to $35.

That implies upside of 15%–30% even before you count the dividend.

HP also remains a Buffett-backed name, as Berkshire Hathaway still holds a large stake, signaling long-term conviction in HP’s cash generation and capital discipline.

For investors with a long-term view, HP offers a prime setup for cash-flow compounding. Use dividends and options premiums to reinvest during down periods.

This “yield stacking” strategy can push your effective return well beyond 6%–7% annually, even with limited price appreciation.

And if HP does bounce? You’ve already made consistent income in the meantime.

Risks to Watch

HP is still in a transition, and with that comes risk:

• Tariff exposure: Despite progress, a flare-up in trade tensions could disrupt margins.

• Product saturation: The PC market isn’t what it used to be. HP needs to grow other lines to stay relevant.

• Execution risk: If cost savings fall short or AI tools underdeliver, margin expansion could stall.

But the market has arguably priced these in. With the stock down over 30% YTD, even modest improvements in operating leverage or sentiment could drive sharp upside.

A Quiet Tech Dividend With Long-Term Upside

HP isn’t glamorous. It’s not dominating headlines or leading the AI revolution.

But it is quietly paying out reliable income, executing on cost control, and setting itself up for a more flexible future.

In a market obsessed with growth-at-any-price, something is refreshing about a tech company trading at a discount and putting shareholders first.

That’s HP right now, and for income-focused investors, it may be one of the more compelling contrarian bets in 2025.