Home Depot Lifts Dividend, Optimistic About Housing


The debate rages on about what's in store for the housing market in 2014. One side says the recovery is still in the early innings. The other side cites the potential for higher interest rates in 2014 as well as continued strength in home prices as deterrents to growth.

That the housing market is emerging from a big slump is good news forHome Depot ( HD ).

Earlier this week, the home-improvement chain reported fiscal fourth-quarter profit of 73 cents a share, up 9% from a year ago. Sales fell 3% to nearly $17.7 billion, hurt in part by bad weather and one fewer week in the quarter. It was also a tough comparison because sales in the year-ago quarter got a lift from Hurricane Sandy.

Sales at stores open at least a year (same-store sales) rose 4.4%. In the U.S., they rose 4.9%.

On the earnings conference call, CEO Frank Blake acknowledged that it would be tough for the housing market to sustain growth rates seen in 2013, but he said the company expects the recovery to continue. Earlier this month, the company announced plans to hire 2,000 employees in the Los Angeles area in anticipation of strong spring demand after a wicked winter in many areas of the country.

Analysts expected solid growth for Home Depot going forward. Fiscal 2015 profit is seen rising 18%, with 2016 profit up 17%. In its just-concluded fiscal 2014, annual return on equity hit a multiyear high of 35.5%.

As part of its earnings release, Home Depot raised its quarterly dividend to 47 cents a share from 39 cents. The dividend will be paid on March 27 to shareholders of record on March 13. Home Depot currently yields 2.3%.

Shares of Home Depot are headed for their best weekly percentage gain since mid-November. The stock is sitting just below its all-time high of 82.57 set during the week ended Jan. 3. With the market still in a confirmed uptrend and with Home Depot so close to its high, an upside breakout can't be ruled out.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ, Inc.

This article appears in: Investing , Investing Ideas

Referenced Stocks: HD

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