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A Look at Home Depot’s Dividend Yield

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Home Depot’s net sales and EPS growth

Home Depot’s (HD) net sales rose 6% and 6.4% for 2015 and 2016, respectively. Comparable sales strengthened during the period. Gross profit rose 6% and 7% in 2015 and 2016, respectively, offset by the increase in the cost of sales. Operating income rose 14% and 13%, respectively, in 2015 and 2016. Operating expenses rose at a slow pace in 2015 compared to 2016. The company posted EPS growth of 25.3% and 16%, respectively, in 2015 and 2016. Interest expense increased while other income fell during the period. Share buybacks enhanced the EPS numbers.

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Net sales rose 7% and 6% in 2017 and 1H18, respectively. Comparable sales strengthened during the period. Gross profit rose 7% and 5.4% in 2017 and 1H18, respectively, offset by an increase in the cost of sales. Operating income rose 14% and 9%, respectively, in 2017 and 1H18, offset by higher operating expense. As a result, EPS rose 18% and 15%, respectively, in 2017 and 1H18. Interest expense rose during the period. Other income fell in 2017, unlike 1H18. Share buybacks enhanced the EPS numbers.

Home Depot’s dividend yield

The dividend yield has increased at a slow pace driven by growth in dividends. The price gains have offset this increase in dividend yield. Prices at present have risen 56% compared to in 2014. The company hasn’t only maintained a good free cash flow balance but has also recorded growth over the years.

Home Depot has a dividend yield of 2.2% and a YTD price gain of 21.9%. Let’s compare that with the broad indexes. The Dow Jones Industrial Average (DJIA-INDEX) (DIA) has recorded a dividend yield of 2.3% and price gains of 18% on a YTD basis. The S&P 500 (SPX-INDEX) (SPY) has recorded a dividend yield of 2.3% and price gains of 15% on a YTD basis. The NASDAQ Composite (COMP-INDEX) (ONEQ) has generated YTD price gains of 23.2%.

The Schwab US Dividend Equity ETF (SCHD) is a dividend ETF with exposure to Home Depot. It offers a dividend yield of 3% at a PE of 20.3x. The FlexShares Quality Dividend Dynamic Index Fund (QDYN) is a dividend ETF with exposure to Home Depot. It offers a dividend yield of 2.7% at a PE of 21.1x.

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