HP's Dividend Is Nothing to Celebrate

NEW YORK ( TheStreet) -- The jacking-up a-dividend tends to be greeted by flowers and chocolate by the media. But therein lies the problem. In the case of, say, Hewlett-Packard ( HPQ), which announced a dividend increase late last week, isn't a dividend increase at this juncture simply reckless?

Yet the media treats HP's dividend boost as--well, a treat.

By its own admission, though, HP is tied in a nasty knot.

CEO Meg Whitman portrayed a reeling company with bleak prospects at HP's shareholder meeting last week.

"Our cost structure is not sustainable," she said. Ouch.

Then she went and raised the dividend. Yikes.

Contradiction anyone? And why didn't the media call her on it? Is this a good time to be raising the dividend? Or instead of buying shareholder friends, should HP be investing in all that really matters in the face of vicious competition from the likes of Apple ( AAPL) and IBM ( IBM): research and development.

All Things D went the typical media route, merely calling the dividend hike "Good news for Hewlett-Packard shareholders." Beyond the very short-run, is it truly?

Bloomberg uses Whitman's startling shareholder meeting admission that HP faces "real financial challenges," without asking if the dividend increase is appropriate.

And to Reuters, HP deserves nothing but praise for keeping a promise. They wrote in their lead:

"Hewlett Packard raised its quarterly dividend by 10 percent, making good on a pledge to shareholders even as it struggles to stabilize its operations and grow its revenue." Considering the evident struggles, are they doing shareholders any long-term favors?

Traders should ask that question (and answer it: no), even when the media fails to.
At the time of publication, Fuchs had no positions in any of the stocks mentioned in this column.

Marek Fuchs was a stockbroker for Shearson Lehman Brothers and a money manager before becoming a journalist who wrote The New York Times' "County Lines" column for six years. He also did back-up beat coverage of The New York Knicks for the paper's Sports section for two seasons and covered other professional and collegiate sports. He has contributed frequently to many of the Times' other sections, including National, Metro, Escapes, Style, Real Estate, Arts & Leisure, Travel, Money & Business, Circuits and the Op-Ed Page.

For his "Business Press Maven" column on how business and finance are covered by the media, Fuchs was named best business journalist critic in the nation by the Talking Biz website at The University of North Carolina School of Journalism and Mass Communication. Fuchs is a frequent speaker on the business media, in venues ranging from National Public Radio to the annual conference of the Society of American Business Editors and Writers.

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