A few years ago, analysts claimed that PCs would be rendered obsolete by waves of new mobile devices. While shipments of PCs have indeed fallen for five straight years, according to Gartner, demand for PCs recently warmed up as new premium and 2-in-1 devices entered the market.

Within this market, you probably won't find companies with double-digit sales or earnings growth. Instead, you'll find mature tech stocks that trade at reasonable valuations and pay decent dividends. Let's take a look at three good income plays in this market -- Lenovo (OTC:LNVGY), Hewlett-Packard (NYSE:HPQ), and Apple (NASDAQ:AAPL).

A woman types on a laptop keyboard, and a cloud of icons "floats" out.

Image source: Getty Images.


Chinese tech giant Lenovo is the biggest PC maker in the world. Its global market share grew from 19.9% to 21.7% between 2015 and 2016, according to Gartner. Last quarter, 70% of Lenovo's revenue came from its PCSD (PC and Smart Devices) business, which consists of PCs, laptops, 2-in-1s, convertibles, and tablets. 18% came from its Mobile Business, and 9% came from the Data Center business.

The PCSD unit posted 2% annual sales growth last quarter, but that didn't offset declines at both the Mobile and Data Center segments, which caused its total revenue to fall 6%. Analysts believe that Lenovo's revenue will fall 4% this year, but it should still generate a narrow profit, compared to a net loss in fiscal 2016.

Lenovo has a trailing yield of 5.2%, but that yield is currently at a multi-year high due to the stock's 24% decline over the past five years. It only pays two dividends annually -- a higher interim dividend in the middle of the year and a lower final dividend at the end. Lenovo started paying those dividends in 2014, and only raised the interim dividend once in 2015. 

Lenovo doesn't follow specific rules regarding dividend payments, but its trailing payout ratio of 47% indicates that it can easily support its current yield. The stock also trades at just 12 times earnings, which is slightly lower than its industry average of 13.


Hewlett-Packard is the second biggest PC maker in the world. Gartner reports that its market share rose from 18.3% to 19.4% between 2015 and 2016. Last quarter, 65% of HP's revenue came from PC sales, and the rest came from sales of printers and imaging devices. HP's PC sales rose 10% annually during the quarter, thanks to rising demand for premium, convertible, and 2-in-1 devices, but printer sales declined.

HP's curved Envy all-in-one PC.

HP's curved Envy all-in-one PC. Image source: HP.

Wall Street expects HP's sales and earnings to stay nearly flat this year. However, the recovery of the PC market and the growth of its printer business -- boosted by new products like mobile and industrial 3D printers, as well as its planned acquisition of Samsung's printing business -- should eventually help it return to growth over the next few years.

HP pays a forward yield of 3.1%, which is easily supported by its payout ratio of 33%. The company notably generated over $700 million in free cash flow last quarter, but spent more than $600 million on buybacks and dividends. HP is also fairly cheap at 12 times earnings.


Apple is the fifth largest PC maker in the world, but Gartner reports that its market share slipped from 7.1% in 2015 to 6.9% in 2016. Mac sales fell year-over-year for several straight quarters, but sales and shipments finally rebounded during the first quarter on its refreshed MacBook Pros.

Apple's new MacBook Pro.

Apple's new MacBook Pro. Image source: Apple.

Mac sales rose 7% annually during that quarter and accounted for 9% of its top line. 69% still came from the iPhone, 7% came from the iPad, and the rest came from Services and other products. Analysts expect Apple's revenue and earnings to respectively grow 6% and 8% this year as iPhone sales rise and services like Apple Pay and Apple Music grow.

Apple pays a forward yield of 1.6%. That might seem paltry, but its payout ratio of 27% indicates that the company could easily double its dividend in the future. Apple has also hiked that dividend every year since reintroducing it in 2012. Apple's P/E of 17 makes it a pricier play than Lenovo or HP, but that premium is justified by its higher growth rates.

The key takeaways

Lenovo, HP, and Apple should all benefit from growing demand for PCs, but investors should also note each company's flaws. Lenovo is too heavily exposed to the saturated smartphone market, the recovery of HP's printing business is still speculative, and Apple still relies too much on the iPhone. But for investors who want fairly cheap stocks with decent dividends, these three computer stocks might just fit the bill.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.