7 Point Home Depot Dividend 2019 Guide (*Expert Analysis*)
My wife Carole is never happy with her kitchen. In fact, she could host her own renovation reality television series. We’ve moved into many homes over the course of our 29-year marriage, and with every inherited kitchen her verdict is the same: “This has got to go.”
This scenario regularly plays out among millions of families, from coast to coast, which is a major reason why The Home Depot (NYSE: HD) has posted consistent growth, even when the economy gets shaky.
Certain cyclical stocks that tend to do well during the spring and summer months are set to outperform; among them are Home Depot.
In addition to its growth prospects, Home Depot pays a healthy dividend. Below, I’ll examine the safety and appeal of HD as an income stock.
Founded in 1978, Home Depot integrated a “Big Box” retail format onto lumber yards and other specialty building materials stores that typically sold to the professional trades.
Home Depot ushered in one-stop shopping, low prices, and a wide variety of do-it-yourself (DIY) residential merchandise, all with convenient suburban locations and extended shopping hours. The formula clicked, making Home Depot a retail icon similar to Walmart (NYSE: WMT).
For most Americans, their home is their biggest asset and an integral part of their long-term wealth building strategy. Homeowners put countless hours into maintaining and beautifying their homes. For them, the home isn’t just a place to live — it’s a crucial investment. They turn to Home Depot to help them protect their investment.
Today, The Home Depot (market cap: $213.1 billion) is the world’s largest home-improvement retailer. With more than 2,200 stores in North America, it’s safe to say that the brand has become a household name.
Home Deport stores average 104,000 square feet with about 24,000 square feet of additional garden area. Home Depot is more than just a hardware store on steroids, though. The company also acts as a contractor that provides much-needed services to homeowners all across the country.
Home Depot isn’t just good to its customers. It’s also great to investors.
As of this writing, the company pays a healthy dividend that amounts to an almost 3% yield.
Is that sustainable? Let’s take a look.
Does The Home Depot Pay Dividends?
If you’re unfamiliar with dividends, they’re cash distributions delivered to shareholders from a company’s net profit. People who own stock in a company will see dividends paid directly to their accounts, usually on a quarterly basis.
A company usually won’t distribute its entire quarterly net profit to shareholders. Instead, the company keeps a portion of the profit as retained earnings.
There are plenty of publicly traded companies that pay no dividends at all. They try to attract investors with the promise of outsized stock price appreciation. But Home Depot offers both growth and income.
What Is The Home Depot’s Dividend?
The Home Depot’s annual dividend is $5.44. It’s paid quarterly.
Home Depot is a component of the Dow Jones industrial Average. Here’s a quick video profile of what you need to know about the company, which has racked up annual dividend growth since 2013.
What Is The Home Depot’s Dividend History?
The Home Depot has paid dividends since the late 1980s. Back then, the company only paid out $.00225 per share.
No, that’s not a typo. That was the first distribution back in 1987.
In those days, the company’s stock was only trading at $0.67 per share. If you do the math, you’ll find that comes out to a 1.30% yield.
Fast forward to today and the company is paying a dividend of $1.36 every quarter.
The next dividend is payable on March 28, 2019 to shareholders on record as of March 14, 2019.
The ex-dividend date is March 13, 2019. That means you must have owned the stock on March 12, 2019 to be eligible to receive the March 28 dividend.
What Is The Home Depot’s Dividend Yield?
The Home Depot’s dividend yield stands at 2.86%.
It’s easy to calculate the dividend yield. Divide the annual dividend amount by the share price.
Keep in mind, though, that the yield changes every day. That’s because the stock price changes every day.
It’s best to check the very latest data when evaluating a company’s dividend yield.
When Is The Home Depot’s Dividend Payout Date(s)?
So far, The Home Depot has only announced the March 28 dividend for 2019.
If history repeats itself, though, you can expect to see upcoming dividends in June, September, and December.
Just remember that you can’t buy stocks just before a dividend date and expect to receive the cash payout.
Pay attention to the ex-dividend date. If you buy the stock on that date or later, you’ll miss the next dividend.
In other words, you must buy the stock one day or earlier before the ex-dividend date if you want the income.
That’s also why the ex-dividend date affects the stock price. Investors know they have to purchase the stock before that date if they want the payout. That increased demand often gives a lift to the stock price.
Also, sometimes the stock price drops on the ex-dividend date itself. That’s because it’s too late to buy the stock for income on that date. As a result, there’s less demand.
There are plenty of income-oriented investors whose interest in Home Depot could affect the stock price around the next ex-dividend date.
Will The Home Depot’s Dividend Increase In 2019?
Home Depot has already increased its dividend in 2019.
The current quarterly dividend of $1.36 is a 32% increase from the previous dividend of $1.03.
Home Depot has increased its annual dividend by 15% to 35% every year for the past several years.
In 2011, the company was paying just $0.25 per share in a quarterly dividend. That’s significantly lower than where the dividend stands today.
Even better: Home Depot didn’t cut dividends during the fallout from the 2008 housing market crash. The company didn’t raise dividends during those tough years, either.
HD’s free cash flow in 2018 came in at $10.6 billion, up from $10.1 billion in 2017. It’s from free cash flow that dividends are paid. Total cash in hand, most recent quarter, was $1.78 billion. The payout ratio is a healthy 56.8%. Rest assured, Home Depot’s dividend is amply covered.
Will The Home Depot’s Dividend Be Cut In 2019?
To be sure, we’re experiencing mixed data on housing.
Early in March, the government reported that new home sales dropped 6.9% in January to a 607,000 annual rate. That’s 4.1% below its year-ago level. Sales increased a sluggish 2.2% all of last year.
However, existing home sales for February rebounded with an 11.8% jump compared to January, beating consensus expectations of a roughly 5% increase.
More than ever, you should stick to high-quality stocks that are in growth mode but boast inherent strengths that will hold them in good stead if the market stumbles.
Home Depot already withstood the housing marketing crash that occurred a decade ago. The company has shown that it’s resilient even in tough times.
Home Depot is one of those companies that can thrive in good and bad economic climates. The company grapples with tough competition from number two DIY retail chain Lowe’s (NYSE: LOW), but Home Depot continually manages to stay a step ahead.
Notably, Home Depot is making greater headway than Lowe’s in expanding its online business. HD recently unveiled three huge direct fulfillment centers, allowing it to ship more orders the same day that they’re received.
Although a solid company and reliable investment, Lowe’s (market cap: $84 billion) is a perennial also-ran to Home Depot in terms of sales growth and capital appreciation. Lowe’s dividend yield also is smaller, at 1.81%.
Despite the rise of e-commerce, Home Depot’s management is confident that most consumers prefer to make purchases of DIY merchandise in person. This tactile experience can’t be duplicated online.
Consumers still appear to be in a spending mood. Instrumental in generating a “wealth effect” among Americans is the steady rise in home prices since their collapse during the Great Recession of 2008-2009.
Signs of global economic slowdown, combined with a cooling housing market, make caution a watchword. However, Home Depot’s trusted brand has proven resilient even during rough macroeconomic patches.
If the economy is doing great, people spend more and Home Depot makes money.
If the economy is in a recession, people often opt to handle their own home repairs instead of hiring contractors. They’ll visit their nearest Home Depot store to pick up the supplies they need.
The big risk with Home Depot has been economic downturns, especially when the housing market loses steam. Rising interest rates pose a concern and less favorable property tax and interest deductions in the U.S. 2017 tax overhaul may dampen demand over the long haul.
The escalating trade war also poses a threat. The Trump administration in April 2017 imposed anti-subsidy duties on imports of Canadian softwood lumber, which has boosted the price of home construction.
However, the overall strength of the economy, combined with the “cocooning” of America (whereby people tend to stay at home) will continue to bode well for Home Depot. The average analyst expectation is for Home Depot to generate five-year earnings growth of 11.1%, on an annualized basis.
Home Depot is a reliable income stock and “defensive growth” play, well-suited to withstand the turbulence that lies ahead in 2019. The American home, and Home Depot’s stock, are where the improvements will be.
John Persinos is the managing editor of Investing Daily.