Home Depot Stock Price

Home Depot: Consistent Dividends, Challenging Market

The Home Depot, Inc.(NYSE: HD ) is the world's leading home improvement retailer and also a consistent dividend stock. With a forward dividend yield of about 3% based on a forward estimated dividend of $1.04 and a closing stock price of $34.93, HD is a solid, albeit unspectacular, dividend payer. Its forward yield is slightly better than Lowe's Corporation's (NYSE: LOW ) forward dividend yield.

HD is a member of Dow Jones Industrial Average and provides employment to approximately 190,000 people. Its stores sell a variety of building materials and lawn products through its 2,248 stores targeted at a range of customers from the do-it-yourself group to professional contractors.

HD, while primarily located in North America, has some stores in China, Guam and the U.S. Virgin Islands. HD organizes its business around four core product groups including Plumbing, electrician, and kitchen; Hardware and seasonal; Building materials, lumber, and millwork; and Paint and flooring. With recent annual sales of $68 billion and a market capitalization of $56 billion, HD is worth almost twice as much as LOW despite only having about 50% more sales and slightly better margins.

The following graph shows HD's dividend yield history. HD while a consistent payer of dividends has only recently begun paying above average dividends.


Created from data from Yahoo!Finance While dividends climbed rapidly into 2007, the stock did little. With the onset of the Great Recession, customers stopped improving their homes and dividends remained quite fact. As the stock price fell, the dividend yield climbed even higher, even approaching 5%.

However, HD has still not fully recovered. Its stock price is about 30% below where it was 11 years ago. Accounting for dividends, this is a -17% return. There has been renewed interest in the stock with a 1 year price appreciation of about 23%, driving the dividend yield lower.

However, if a second recession hits, consumer spending might refocus on the essentials instead of a new sink in the bathroom or nice deck for the backyard, thus limiting HD's near term future. For now, I will continue to watch HD to see how things play out. In the absence of strong dividend growth (4% over the last couple years), I don't see it as a compelling long for dividend stock investors; however, there might be a valuation pairs trade in combination with LOW.