Home Depot announces dividend increase

Holders of shares of retail giant Home Depot received refreshing news. During the company’s Q4 2022 earnings call, the company announced dividend increases for its investors. With this move, long-term investors are the main beneficiaries.

It is important to note that this is not just any company, but the benchmark in the home improvement sector. It is also the fourth largest in the entire retail area as a whole. The company has $308 billion in market capitalization. It employs more than 500,000 workers and operates 2,300 stores worldwide.

In terms of shareholder value, the company’s stock has experienced a powerful 60% growth over the past five years. The latter is a result of the momentum in the home improvement market before and during the pandemic. Confined to their homes and without major discretionary spending, people chose to invest in their properties. As mentioned, this chain is the main benchmark in this regard.

Without fear of exaggeration, when it comes to home improvement, this company is at the forefront of the minds of U.S. consumers.

Home Depot increases its dividend by 10%

Increasing dividends is one of the most advantageous strategies for companies to attract investors. This becomes particularly important when companies have a business model that allows them to earn sustainable profits. As one of the pillars of the retail sector, Home Depot is among this group.

For years now, the company has established itself as one of the few to increase its dividend despite tough conditions. Thus, long-term investors can consider themselves happy with the income they have been receiving in the form of dividends. In that sense, with the recently announced increase, the happiness of these capital receives increases.

Thus, last February 21, during the fourth quarter earnings call, the company announced its new dividend increase. Specifically, the increase is nothing less than 10%. “Today, our Board approved a 10% increase in our quarterly dividend to $2.09 per share, which equates to an annual dividend of $8.36 per share,” said the firm’s CEO, Edward Decker.

He added that Home Depot is convinced of the strength it has to maintain this growth momentum over the long term. “We believe the long-term fundamentals of our market remain strong and we are well positioned to leverage our distinct competitive advantages to capitalize on attractive growth opportunities in our space,” he said.

With this upside, the company’s stock solidifies itself as an excellent choice amid current conditions.

Home Depot’s stock status

This retailer’s stock does not fall into the select club of “dividend aristocrats.” These are companies that raise their dividends for 25 consecutive years. However, that does not overshadow the fact that for 35 years in a row it has been paying such rewards to its shareholders. The latter is easy to say, but in reality it is nothing less than 141 quarters.

During the financial crisis of 2008, the firm found itself in the painful position of not making these increases. As far as the company’s financial health is concerned, the fact that it is one of the strongest in the entire U.S. economy stands out. Despite the headwinds that can occur, the firm has a strong business model. That allows it to grow (at best) or at least withstand the onslaught of a likely difficult 2023.

“Uncertain macroeconomic conditions for 2023 prevented the company’s shares from rising despite the announcement of increased dividend payments”

One should not lose sight of the fact that the company is highly dependent on the supply chain functioning optimally. For example, the company sells raw materials such as wood, which was terribly in short supply over the past few years. Despite this slog, the company ended 2022 with solid numbers. That situation was reviewed by the company’s CFO, Richard McPhail, who highlighted the remarkable revenues during the fourth quarter:

“In the fourth quarter, total sales were $35.8 billion, an increase of approximately $100 million or 0.3% over last year.”

He went on to add more specific Home Depot data.

The company’s figures in 2022

McPhail recounted the company’s financial figures, as well as the setbacks they had to overcome in 2022. Such is the case of the aforementioned lumber prices. The executive said that the prices of this raw material negatively affected offset sales by 0.7%.

“For the year, our sales totaled a record $157.4 billion, with sales growth of $6.2 billion or 4.1%, compared to fiscal 2021. For the quarter, total company comp sales increased 3.1% and U.S. comp sales increased 2.9%,” he noted.

On the other hand, it was learned that the retailer’s gross margin in the fourth quarter was 33.3%. This represents an increase of 0.07% compared to the same period last year. For the full 2022 data, the gross margin was 33.5%. The equivalence of this was negative -0.1% compared to 2021 data.

This whole Home Depot prospect is leading investors to step on solid ground. The sales revenue numbers seem to put the retailer back on top of the business. At least that’s what the enthusiasm of the company’s board suggests in the heat of recent quarterly earnings data.

While the company is not ruling out 2023 as a flat year for earnings due to macroeconomic conditions, there are also reasons for optimism. One of them is the state of the housing market, whose low prices could push buyers to purchase new or used homes.