Have you been keeping an eye on The Home Depot Inc’s (NYSE:HD) upcoming dividend of US$1.03 per share payable on the 13 September 2018? Then you only have 2 days left before the stock starts trading ex-dividend on the 29 August 2018. Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let’s take a look at Home Depot’s most recent financial data to examine its dividend characteristics in more detail.
How I analyze a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is it the top 25% annual dividend yield payer?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has the amount of dividend per share grown over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Will it have the ability to keep paying its dividends going forward?
How well does Home Depot fit our criteria?
Home Depot has a trailing twelve-month payout ratio of 46.7%, which means that the dividend is covered by earnings. Going forward, analysts expect HD’s payout to remain around the same level at 46.8% of its earnings, which leads to a dividend yield of around 2.4%. Furthermore, EPS should increase to $9.93.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. In the case of HD it has increased its DPS from $0.90 to $4.12 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.
Compared to its peers, Home Depot generates a yield of 2.0%, which is on the low-side for Specialty Retail stocks.
With these dividend metrics in mind, I definitely rank Home Depot as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three pertinent aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for HD’s future growth? Take a look at our free research report of analyst consensus for HD’s outlook.
- Valuation: What is HD worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether HD is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.