Home Depot(NYSE: HD) is a retailer who does not need an introduction. The company has more than 2,300 stores across North America, making it a one -known one -known desk for DIY tasks, professional entrepreneurs and a service segment that can help customers with their renovation projects.
The expansion of Home Depot corresponds to a strong performance in stock. Its market capitalization has increased from around $ 50 billion 15 years ago to more than $ 380 billion today. As a leader in industry and a component of both S&P 500(Snpindex: ^ GSPC) And Industrial average Dow Jones(Djintices: ^ dji)Home Depot is about as Blue Chip as possible.
Here is why Home Depot remains a foundation dividend These passive income investors can build their portfolio around 2025 and beyond.
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Home Depot’s updated directives from November (when she said that the third quarter results for the year 2024) call for a drop in comparable stores of 2.5% for the full financial year and a diluted action (BPA) of 1% when adjusting the company’s 53 weeks. So, overall, low results. Especially during factoring in relatively easy compositions.
During the year 2023, comparable sales of Home Depot dropped by 3.5% while the diluted BPA dropped by 9.5%. It is enough to say that Home Depot is undoubtedly in a multi -year slowdown, which is obvious by examining its growth in stagnés sales and declining operational margins in recent years.
Despite poor results, the stock of Home Depot has not experienced significant drops. It increases approximately 11% in the past three years and 57% in the past five years. That said, he underperforming the S&P 500.
Given the negative growth of comparable sales, the action has been resilient, probably because the market deals more at the place where a business takes place than where it is today. Home Depot’s long -term investment thesis has not changed. It’s just that the current macroeconomic backdrop is a major headwind for Home Depot.
High interest rates make it more expensive to finance home improvement projects. High mortgage rates dissuade purchases of houses, which can lead to a drop in sales of houses. The price of houses in Case-Shiller houses, which measures residential real estate prices in the United States, is at a 10-year summit. Mortgage interest rates have a level more than 10 years. And American credit card debt exceeds $ 1.2 billion – an increase of almost 50% compared to pre -pale levels.
Meanwhile, sales of existing American houses are close to a tank at 10 years and about 20% of pre -pale levels – which suggests that fewer houses are sold. And the index of the affordability of the American fixed housing is About 100This means that only median household income with a 20% deposit can afford a house. Essentially, buyers who seek to perform a lower deposit or those who have an income below the Media are a bit at a market price.
In a perfect world, Home Depot would prefer that everyone has a house and can afford renovation projects. Thus, a tense housing market shows how difficult the current operating environment is. But there are always two sides at a medal.
The prospect of half-video on Home Depot is that the macro backdrop is bad and shows no sign of improvement. Thus, short -term growth could remain at downside in the foreseeable future.
The perspective of half -glass is that the results of Home Depot barely drop despite so many challenges – a testimony of the strength of its brand.
In other words, 2023 and 2024 acted as a stress test on Home Depot, and the company has passed with flying colors.
Regarding significant dividend increases in the past 15 years, few companies can compete with Home Depot. The company noted its quarterly dividend from $ 0.25 per share in 2011 to $ 2.25 per share in 2024 – with coherent increases each year during this period.
Investors were able to count on increases like Clockwork. Since 2013, Home Depot has announced an increase in dividends in February or March (almost at the same time, it reports budgetary profits except for the year). Thus, investors can expect another increase in home depot when it published profits on February 25.
The increases in coherent and important dividend from Home Depot and the yield of dividends of 2.3% make it a solid choice for passive income investors.
In addition to its strong dividend, Home Depot has a reasonable assessment. Its price / benefit ratio (P / E) is 26.2 and its front p / e is 24.5 compared to a median p / e of 22.9 in the last 10 years. Although Home Depot seems to be a little overvalued at first glance, it is important to recognize that the home improvement industry is currently slowdown. Thus, the share of Home Depot has exceeded its growth in profits in recent years.
Home Depot could be a rolled source for economic growth. The company has completed its acquisition of the SRS distribution for $ 18.25 billion in June 2024. The acquisition gave additional exposure to Home Depot to the entrepreneurs market, helping to diversify the global company. The full potential of the acquisition has not yet been carried out due to the slowdown in the industry.
The ability to make a counter -cyclical movement of this size testifies to the strength of the Home Depot assessment, the staging of management on the long -term strategy rather than on short -term results and Home Depot’s desire to make an important acquisition, even if it takes some time to be paid.
All in all, Home Depot seems a little expensive now. But the stock could start to seem very cheap during the next period of expansion, in particular given the additional cut of the SRS.
Companies operating in cyclical industries tend to see major flows and flows in their sales and profits. But not Home Depot. Zoom out, and the company’s performance is like a higher regular rise, then a flat line rather than a large slowdown.
With the 2025 exercise marking the first full year after the integration of SRS, we could see a slight increase in sales and profits, even if interest rates remain high.
Home Depot is an excellent stock of dividends to buy if you have a long -term time horizon. The growing dividend offers interesting incitement to maintain stock through slowdowns. And the evaluation is reasonable given the factors discussed. However, expect the short-term results of Home Depot to be under pressure until the macro climate improves.
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Daniel Foelber Has no position in the actions mentioned. The Motley Fool has positions and recommends Home Depot. The Word’s madman has a Disclosure policy.
