Many thought that the collapse in the housing market would harm Home Depot but the company has survived and even thrived over the last couple of tough years as more and more people turn to do-it-yourself to save money. From 2007 until now, Home Depot increased its dividend by 9%. Today, the company boasts a dividend yield of 2.70%. That's not as high as an AT&T or Verizon, but still very respectable.
The company's fundamentals look good. Its return on average equity is 17.44, amongst the highest of its peer group and it's PE is 17.7%, in-line with its peers. Its price to sales is .87 and price to book is 3.26. The companies operating margin is 8.76% which is higher than Lowes (7.39%).
A recovering economy should help Home Depot continue to grow although the company is positioned nicely even if slow growth continues. If the economy briskly then it picks up more contractor and new home business. If not, then it continues to supply the needs of the DIYers and those renovating foreclosed homes. Analysts expect the stock to grow 15% per annum over the next five years.
The biggest threat to Home Depot stock may be the overall market, which has been fueled by buckets of Federal Reserve cash. If and when the Fed turns off the money spigot, the stock market could drop, pulling down everything, including Home Depot. For those looking for a nice dividend payment and are willing to take the risk or hold the stock for the long term, Home Depot looks like a good bet.
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