Will HPE’s Profit Margins and Dividend Yield Improve in Fiscal 2018?
Operating margin expected to reach 7.6% in fiscal 2018
Analysts expect Hewlett Packard Enterprise’s (HPE) net margin to be 2.5% with an operating margin of 9% in fiscal 2018. HPE recorded a net margin of 1% with an operating margin of 6.3% in fiscal 2017. Profit margins are expected to rise further in fiscal 2019 and 2020 driven by HPE’s focus on improving operational efficiency.
HPE’s net margin is expected to rise to 4.4% with an operating margin of 9.2% in fiscal 2019 while the firm’s operating margin and net margin are expected to be 3.7% and 9.1%, respectively, in 2020 compared with revenue growth of over 2% YoY. In 2017, HPE’s margins have been impacted by rising DRAM (dynamic random access memory) and NAND (negative AND) prices.
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HPE announced cost savings of $200 million and $300 million in the second half of fiscal 2017 to offset the impact of high commodity prices. Peer companies IBM (IBM), Juniper (JNPR), Nokia (NOK), and NetApp (NTAP) reported net margins of 7.3%, 6.1%, -6.5%, and 9.2%, respectively, in their last reported fiscal years.
Another way that a company improves shareholder value is by the payment of dividends. HPE has a dividend yield of 2% or an annualized payout of $0.30 per share. HPE’s dividend payout ratio stands at 25.2%. In comparison, the dividend yield for IBM (IBM), NetApp (NTAP), and Juniper (JNPR) stands at 4%, 1.4%, and 2.8%, respectively.