Instant Analysis: Hewlett Packard Enterprise Declares Its First Dividend Raise

What happened?

It's a fine way to kick off a new fiscal year. Now in the opening days of its fiscal 2017, Hewlett-Packard Enterprise (NYSE: HPE) has declared the first dividend raise in its short history. The company's new quarterly payout will be just under $0.07 per share, which is $0.01 -- or 18% -- higher than its predecessor.

Image source: Getty Images.

Just over one year ago, Hewlett-Packard Enterprise was hived off from the company now known as HP (NYSE: HPQ).

Hewlett-Packard Enterprise's freshly raised dividend will be paid "on or about" Jan. 4, 2017, to stockholders of record as of Dec. 14, 2016. At the most recent closing share price, it would yield 1.1%. By comparison, the current average yield of dividend-paying stocks on the S&P 500 is slightly below 2.1%.

Does it matter?

An extra penny on the dividend, resulting in a yield barely exceeding 1%, isn't going to move the needle on Hewlett-Packard Enterprise stock (particularly considering the company's sibling, HP, pays out at a 3.2% clip).

But I don't think the point of the raise was to juice the share price. Rather, the goal seems to be to reinforce CEO Meg Whitman's oft-stated ambition to keep returning money to shareholders. After all, in addition to handing out a dividend, the company also runs a big stock repurchase program. All told, it returned around $1.5 billion to shareholders in its Q3.

Investors are concerned that Hewlett-Packard Enterprise's top line is eroding (it declined by 6% on a year-over-year basis in Q3). But revenue growth isn't the point -- Whitman aims to slim down the company, to the point where it's a lean, flexible business that is better able to react to its ever-changing market. A pair of spinoffs slated to take place soon is a big move in that direction.

Meanwhile, Hewlett-Packard Enterprise is comfortably in the black on the bottom line, and it's good at generating the green stuff -- its adjusted cash flow from operations rose an encouraging 10% on a year-over-year basis in Q3. So no, this inaugural dividend raise won't mean a bull rush toward its stock, but it's a good sign of confidence in how the company's doing.

Forget the 2016 Election: 10 stocks we like better than Hewlett-Packard Enterprise Donald Trump was just elected president, and volatility is up. But here's why you should ignore the election:

Investing geniuses Tom and David Gardner have spent a long time beating the market no matter who's in the White House. In fact, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now...and Hewlett-Packard Enterprise wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of November 7, 2016.

Eric Volkman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.