High-Dividend Stock Offers 4.5% Return Yet Slipped 21% in 2025: Worthy Investment Now?
HP Inc. (HPQ), the global technology company, finds itself in a mixed investment scenario. The stock has faced a setback in 2025, with a decline of approximately 21%, primarily due to increased tariff costs that have squeezed margins and a challenging macroeconomic environment reducing PC demand and pricing power [1][3].
Despite the downturn, HPQ offers an appealing proposition for income-focused investors, boasting a high dividend yield of nearly 4.5% [1][3]. However, the investment case is not without its risks.
Analysts covering HPQ are mostly cautious or neutral, with only 3 rating it as a "Strong Buy," 10 as "Hold," and 1 as "Strong Sell," indicating a predominantly cautious sentiment [1]. The stock currently trades slightly above a Street-low target price of $22, but the average price target is about $27.27 to $30.46, suggesting a potential upside of 6-21% from current levels [3].
Several major brokerages, including Bank of America, Citigroup, Morgan Stanley, JPMorgan Chase, and TD Cowen, have lowered their target prices following HP's recent fiscal Q2 2025 earnings miss and pessimistic guidance, attributing the issues to tariffs [1].
HP's valuation metrics also indicate an inexpensive stock. The company has a low price-to-earnings ratio of around 9.6 (trailing) and a forward P/E near 7.7 [3].
The company has taken measures to mitigate the impact of tariffs by increasing sourcing from India, Vietnam, Mexico, Thailand, and the U.S [1]. HP's dividend policy remains committed to returning all free cash flows to investors through dividends and buybacks.
The Windows 11 refresh cycle and the aging of the current installed base of PCs are key drivers for the PC industry's growth. Sales of artificial intelligence (AI) PCs are picking up, contributing to an uptick in average selling prices [1].
HP expects its adjusted earnings per share (EPS) in the current fiscal year to be between $3 and $3.30 [1]. The company has lowered its fiscal year 2025 free cash flow guidance to between $2.6 billion and $3 billion [1].
Investors considering HPQ should weigh the income benefit against the risk of continued margin pressure and muted growth, monitoring upcoming earnings and tariff developments closely before making a decision. HP's stock might appeal to investors looking for high dividends and are comfortable with overall gains near 10% over the medium term. However, the ongoing tariff headwinds, disappointing earnings results, and cautious analyst ratings indicate significant risks remain. The consensus view leans towards a hold rather than a strong buy, with moderate upside possible if the company can overcome macro challenges.
[1] Yahoo Finance. (2025). HP Inc. (HPQ). [online] Available at: https://finance.yahoo.com/quote/HPQ?p=HPQ
[2] Seeking Alpha. (2025). HP Inc. (HPQ) Q2 2025 Earnings Call Transcript. [online] Available at: https://seekingalpha.com/news/3794104-hp-inc-hpq-q2-2025-earnings-call-transcript
[3] CNBC. (2025). HP stock surges after earnings, but analysts say tariff pressures will linger. [online] Available at: https://www.cnbc.com/2025/08/24/hp-stock-surges-after-earnings-but-analysts-say-tariff-pressures-will-linger.html
- Given HP Inc.'s ongoing tariff struggles and muted growth, investing in HPQ might be attractive for income-focused technology investors due to its high dividend yield, but the risks associated with continued margin pressure should not be overlooked.
- In the face of a challenging investment landscape for HPQ, analysts have predominantly expressed a cautious sentiment toward the stock, suggesting a consensus view of a 'hold' rather than a 'strong buy,' with a moderate upside possible if the company overcomes macroeconomic challenges, which could lead to gains near 10% over the medium term.
