As much as we all like to see our stock purchases in the green and moving upwards, seeing prices come down should be welcomed with open arms for those still in the accumulation phase as it presents buying opportunities.
The DGI community has been busy lately as a result of the market movement, and I am happy that I’ve had a chance to put some more capital to work as well.
My most recent purchase is a company that I became much more familiar with once we bought a house, and I will admit that I’ve been guilty of simply wandering the aisles thinking about different projects that we could do around the house.
Background on Home Depot
Anyone that owns a home is likely quite familiar with Home Depot, as they have just about everything one might need for projects around the house–from lawn care to appliances to full remodels, they have you covered.
However, one thing that is not always known is that Home Depot was certainly not first to serve this market.
Having been founded in 1978, and headquartered in Atlanta, Georgia, they actually entered the home improvement space approximately 30 years after Lowe’s was founded. There might be some geographical bias, but in our area when one thinks of home improvement the default brand that comes to mind is Home Depot.
With over 2,200 retail stores across the United States, Canada, and Mexico in addition to over $100 billion in annual sales, it appears I am not alone in that thinking.
Home Depot By the Numbers
Home Depot has been delivering uninterrupted dividends to shareholders for 25+ years ever since their first quarterly dividend payment back in 1987. However, their track record of paying an increasing dividend is a more modest 9 years.
As seen above from Simply Safe Dividends, Home Depot has a very healthy dividend safety score of 94 and this indicates that their dividend appears to be much safer than most companies from experiencing a dividend cut.
In addition, the current dividend yield of 2.28% is approximately 10% above their 5-year average dividend yield.
While their P/E ratio is a little rich at 18.1 compared to the consumer discretionary sector that is currently at a P/E ratio of 14.9, they are actually trading below their 5-year average P/E ratio of 20.3.
The combination of their dividend yield tracking higher than the 5-year average with the P/E ratio tracking lower than the 5-year average indicates that Home Depot may be slightly undervalued.
Looking at Home Depot on FAST Graphs, we see that Home Depot is trading inline with their normalized P/E ratio over a 10-year period. This typically represents that the price is fairly-valued right now.
Home Depot has maintained a payout ratio between 40% and 50% over this time period as well, and that is well within my guidelines that I look for in my dividend stocks.
The earnings growth for Home Depot has been quite strong, with an increase of 35.6% in the most recent quarter and solid double-digit growth over the last 8 quarters. The reasonable payout ratio and strong earnings growth help offset their debt levels, which do tend to be a little high.
As shown above, Home Depot has had stellar dividend growth over a long period of time with annual growth surpassing 20% over the last 1-year, 5-year, and 20-year periods.
Recognizing that they did not increase their dividend during the Great Recession, it is quite impressive that their 20-year dividend growth is still above 20% as that means that there have been some extremely significant increases over the years.
Adding to Home Depot Position
While Home Depot was not on my dividend watch list this month, October has not been kind to Home Depot with the price declining roughly 10% since the first of the month.
Despite not having Home Depot on my radar, their most recent decline was too hard to resist and I decided to add to my position.
Here is a summary of my purchase:
The 5 shares purchased at $182.50/share will add an additional $20.60 in forward dividend income.
Overall, this increases my position in Home Depot to 15.1 shares.
Following my recent trend, I will continue to watch Home Depot for a potential secondary purchase if the price continues to decline. I’d be looking to add a bit more if the price comes down around the $173 to $175/share range.
The increase in forward dividend income now brings my portfolio to $4,927.42 in total forward dividend income.
With a goal to reach $5,000 in forward dividend income, I am confident that by continuing to invest new capital that I will be able to achieve this goal. There continues to be buying opportunities in this market, and the important thing is to remain calm and true to your strategy amidst the market swings.
Despite the fact that Home Depot was not on my radar as we entered into October, by continuing to monitor my entire portfolio and evaluate potential buying opportunities, I was able to add to my position at what I felt was an attractive price.
There may be near-term challenges for Home Depot with the recent storms that have hit the east coast of the United States as well as potential slowdown in the housing market, including remodeling and renovations. However, Home Depot has demonstrated an ability to navigate those choppy waters in the past.
Overall, I have the same confidence in Home Depot that I did when I made my initial purchase at ~$187/share, therefore I was happy to have the opportunity to add to my position and slightly reduce my cost basis.
What do you think about Home Depot?
Images courtesy of FAST Graphs and Simply Safe Dividends.
18 thoughts on “Recent Buy :: Home Depot”
Nice buy. I recently went on a buying spree. Hard to ignore good prices, especially when you have money to burn lol. Keep it up.
Thanks Doug! Yeah, you made quite a few nice purchases and added to that forward income. Doing my best to keep feeding the dividend machine!
I think you may a great buy and thank you for giving insights in your analysks6qith SSD and Fast Graphs.
I’ve been wanting to add a similar company like this but never liked the entry price. I might reevaluate again next month!
Thanks Mr. Robot, I hope people are liking the inclusion of SSD and FAST Graphs as I have found them to quite helpful as part of my analysis.
I am going to start causing you Busy Divvy, because you are on a relentless path, it’s amazing. What a great dividend score and dividend growth rate, HD is awesome, you’ll love those dividends and the growth to go with it.
Haha, well I think you and Bert have been leading the charge in terms of activity! You guys have made quite a few very nice buys lately. It’s hard to complain with a quarterly payment over $1/share and continuing to grow!
Kicking myself here. Looked at HD years ago as we came out of the housing and real estate crisis. I always thought the dividend yield was too low and the stock overpriced so I never purchased. Duh. Missed out on a wonderful trifecta of growing dividend, capital appreciation and smallish current yield. Subconsciously, I believe it’s one of the lessons that has lead me more to lower yielding, faster growing DG stocks the last 5 years or so. Hopefully my missed opportunity is your gain. Tom
Thanks Tom, and I will say that as I was putting my portfolio together earlier this year I almost passed over HD for the exact reason that you mentioned. I was too focused on the yield, but as I began to appreciate the power and importance of the dividend growth this one caught my eye.
Nice addition to your portfolio. It’s getting close to that $5000 forward annual income target and I’m sure you will reach it if you continue like this 🙂
I don’t have Home Depot in my portfolio yet but will need to add it to my watchlist for my next buy. Thanks for a nice summary!
Thanks BI, and as long as we continue to see buying opportunities over the next few months I am confident that I will hit that target–but ideally I would like to surpass it!
nice purchase, and for sure a very safe play. Your portfolio is really growing fast! Keep up the good work.
Thanks Andy! I am definitely trying my best to aggressively build my DGI portfolio and am happy to find these opportunities to add to what I consider to be quality, long-term holdings.
solid company that we deal with for most of our house upgrades.
The storms could also be a good thing for hd as people rebuild.
great breakdowns of them and nice purchase.
keep it up
Thanks PCI, and like you we frequent our local store for all kinds of projects around the house both big and small.
On the storm front, there can be benefits as people need to recover from storms and turn to stores like Home Depot to buy materials, tools, etc. However, at the same time it can disrupt their distribution and same-store sales if people are unable to get out and shop.
Appreciate the feedback, and hope that as HD continues to revamp their online offerings that they will continue to be strong growth company.
Fantastic purchase at a reasonable price, DivvyDad! You’ll reach $5k in forward annual dividends in no time. Keep it up!
Thanks Kody, and after my most recent purchase of BlackRock, I should hit the $5k mark with my next purchase! I’m going to have to set a revised goal for the last couple months of the year!
I’m sure this will be a quality addition to your portfolio, DivvyDad. I looked over both HD and LOW a few months ago and decided on LOW, but at the time I believed both would be fine investments. Nothing has changed in my mind since that time.
HD’s dividend growth history is absolutely amazing.
Great to see you closing in on the $5K forward dividend income mark. You’ll have to set your sights even higher pretty soon!
Thanks ED, I agree with you that I think they are both fine investments and both should perform admirably. One of the reasons that I went with HD over LOW was primarily because LOW has really struggled in our area and closed a number of stores, therefore HD is more familiar to me and is my preference when we need something.
I need to calculate a revised goal I think, maybe $5,250 as that would be a bit of a stretch based on average capital being invested.