When HP (NYSE:HPQ) split with Hewlett-Packard Enterprise (NYSE:HPE) in late 2015, HP retained the company's PC, printing, and imaging businesses, while HPE kept the enterprise hardware and software units.

At the time, many analysts believed that HP would continue to be a slower-growth income play, while HPE would deliver faster growth. But over the past 12 months, HP shares have rallied more than 30%, while HPE shares fell about 13%.

HP's Spectre x2 convertible computer, showing its pen-based input.

HP's Spectre x2. Image source: HP.

Analysts expect HP's revenue and earnings to respectively rise 4% and 3% this year. Those numbers don't sound exciting, but they're solid figures for a "mature tech" company. Looking ahead, I believe HP investors don't have anything to worry about -- since the stock should head higher for three simple reasons.

1. A growing market leader in a sluggish market

Research firm Gartner recently reported that global PC shipments fell 4% annually during the second quarter, marking the industry's 11th straight quarter of declining shipments. That slowdown was mainly attributed to the rise of mobile devices and longer PC upgrade cycles, and it was exacerbated by higher costs of components such as memory chips, solid-state drives, and LCD panels that drove up PC prices.

But amid those industry declines, HP posted its fifth straight quarter of year-over-year shipments growth, and it reclaimed its crown as the world's top PC maker from Lenovo. HP's PCs sold particularly well in the U.S., which has been a tough market for other PC makers.

That growth is reflected in HP's 10% annual growth in personal-systems revenue last quarter. Double-digit sales growth of its notebooks, fueled by higher demand for ultrabooks and 2-in-1 devices, offset a single-digit decline in desktop sales.

2. An evolving printing business

HP's printing unit has also been diversifying away from traditional consumer printers. It's introduced new mobile printers for smartphones, such as the popular Sprocket, along with new industrial 3D printers for manufacturers and new A3 copiers. HP controls only 4% of the A3 copier market, but that share should significantly rise after its acquisition of Samsung's (NASDAQOTH: SSNLF) printing business closes later this year.

HP's Sprocket mobile printer.

HP's Sprocket mobile printer. Image source: HP.

HP says the $1.05 billion deal, which it announced last September, could help it "disrupt and reinvent" the $55 billion copier industry by replacing existing copiers with new multi-function printers. HP also believes the Samsung acquisition will become accretive to earnings in the first full year after the deal closes.

The ongoing changes at HP's printing unit are already reflected in its 2% annual revenue growth last quarter. Sales of both its commercial and consumer printers rose, and those figures should keep improving as the business evolves.

3. Low valuations and a solid dividend

HP trades at 13 times earnings, which is far below the industry average P/E of 21 for PC manufacturers. Its price-to-sales ratio of 0.6 is also much lower than the industry average of 1.

HP's forward dividend yield is 2.9%, which is much higher than HPE's 1.5%. Over the past 12 months, HP spent just 36% of its earnings and 34% of its free cash flow on those dividends -- so it has plenty of room for future increases.

In the first half of 2017, HP returned 95% of its free cash flow to shareholders through dividends and buybacks, easily exceeding its previous full-year target of 50% to 75%.

The key takeaways

HP isn't a high-growth stock. But its PC business is outperforming its industry during a tough multi-year downturn, its printing business is launching new products and entering new markets, and it's keeping shareholders happy with big dividends and buybacks. All these factors make HP a solid income play for a frothy and unpredictable market.

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.