Home Depot Dividend Stock Analysis (HD)
Home Depot Dividend
The Home Depot dividend has been paid since 1993 and increased 6 consecutive years. HD is included in the Arbor Dividend Growers / Producers List.
Current Dividend: $3.56
Dividend Yield: 2.3%
Cash Dividend Payout Ratio: 40%
Market Capitalization: 185 B
Enterprise Value: 206 B
Sector: Consumer Cyclical
Industry: Home Improvement Stores
Home Depot (HD) operates over 2,300 home improvement stores in the United States, Canada, and Mexico. With over 83 billion in revenues, Home Depot is the largest home improvement retailer in the world.
Home Depot targets its products and services to three customer groups: Do It Yourself (DIY), Do It For Me (DIFM), and Professional Customers.
The company has a three pronged strategy for success: customer service, product authority, and a disciplined capital approach. They have excelled at all three.
SWOT Analysis For Home Depot
Home Depot is benefiting from a robust housing market and its extensive improvements in their merchandising and distribution system. The company’s capital allocations have been used to increase shareholder value through rising dividends, stock buybacks, and capital investments.
Home Depot has sustainable competitive advantages because of its size. It is a low cost provider with significant bargaining power with its suppliers and vendors. The company is investing in technologies that allow customers to connect across multiple platforms and associates to more efficiently provide quality customer service.
Much of success of Home Depot stock can be attributed to internal productivity gains and massive stock buybacks, both of which are unsustainable. There has been little growth from new stores. Some analysts fear that stock buybacks have inhibited capital expenditures that will damage long term prospects.
Home Depot has excelled at meeting their target customer’s needs. Yet they have only a small percentage of the professional market. In other words, this is a market where there is meaningful prospects for gaining market share.
Competition in a very cyclical industry is always a worry. In an era where consumers are gravitating towards e-commerce a company must be in a constant mode of change.
Dividend Analyzer Checklist
(updated December 2016)
Dividend Safety Score (18/33 points)
Dividend Per Share (ttm): $2.66
Dividend Payout Ratio (ttm): 43%
Dividend Per Share (10 Year Growth): 19.4%
Cash From Operations (CFO) Per Share (ttm): $7.97
CFO Dividend Coverage (CFO / DPS): 3.0 (3/6 points)
Free Cash Flow (FCF) Per Share (ttm): $6.71
FCF Dividend Coverage (FCF / DPS): 2.5 (5/6 points)
Net Financial Debt: $19292 M
Total Assets: $44502 M
Net Financial Debt / Total Assets: 43% (3/12 points)
Net Financial Debt to EBITDA (ttm): 142%
Total Liabilities to Assets Ratio (Qtr.): 87%
Piotroski Score (1-9) (TTM): (7/9 points)
Profitability & Growth Score (21/33 points)
Revenue (10 Year Growth) *CAGR > 4.14%: 1.4% (0/4 points)
EPS Basic Cont. Operations (10 Year Growth) CAGR > 4.14%: 7.6% (4/4 points)
Cash From Operations (10 Year Growth) CAGR > 4.14%: 3.5% (0/6 points)
Operating Earnings Yield (ttm): 8.1% (5/7 points)
Net Income (ttm): $7684 M
Gross Profit (ttm): $31916 M
Total Assets: $44502 M
Gross Profitability Ratio = GP / Total Assets: 72% (12/12 points)
Cash Return On Invested Capital (CROIC)(tttm): 30%
Return on Invested Capital (ROIC): 28%
Return on Invested Capital (ROIC) (5 Year Median): 20%
Return on Invested Capital (ROIC) (10 Year Median): 15%
Valuation Score (16/34 points)
Free Cash Flow Yield (ttm): 5.2% (6/9 points)
EV to EBIT (ttm): 13.5 (5/9 points)
EV to EBITDA (ttm): 11.8 (5/9 points)
PE10: 40.3 (0/7 points)
Price to Sales Ratio (ttm): 1.7
Price to Book Value (ttm): 28.1
Price to Earnings Ratio (P/E) (ttm): 20.9
TOTAL POINTS – (55/100) (50 is an average score)
*Compound Annual Growth Rate (CAGR)
**A Compound Annual Growth Rate of 4.14% = a 50% gain over 10 years.
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(updated December 2016)
Home Depot (HD) is ranked #88 (out of 245) and #24 (out of 32) in the consumer cyclical sector by the The Dividend Analyzer.
Home Depot has used debt to buy back shares. The result is a more leveraged balance sheet and a high stock price.
For an investor trying to decide between Home Depot and Lowe’s (LOW); it’s basically a toss-up.
Portfolio Position Disclosures:
DVB Foundation Portfolio – None
DVB Dividend Growth – None
DVB High Income – None
Arbor Asset Allocation Model Portfolio (AAAMP) – None
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