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A Close Look at Home Depot Inc's Dividend

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Like all of its fellow Dow members, Home Depot (NYSE: HD) is committed to paying a significant dividend to its shareholders. The home improvement titan sent $3 billion of cash to investors last year and is on track to deliver almost $3.5 billion in 2016.

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LOW Dividend data by YCharts .

Prospects for future growth

Home Depot is targeting a 16% spike in profit this year, which implies another double-digit raise for income investors in early 2017. The longer-term picture looks even healthier for this retailer.

Image source: Home Depot.

Home Depot is planning to grow sales at a 5% compound annual rate through 2018, when executives plan to pass $100 billion of revenue for the first time. Profits should improve at a much faster clip. CEO Craig Menear and his team are forecasting that operating margin will rise to 15% of sales, up from below 12% in 2013.

The key drivers for those gains will be continued market share growth as Home Depot expands deeper into the professional side of the home improvement industry. Its recent acquisition of Interline Brands also gives it a significant presence in the maintenance, repair, and operations segment that it hopes to capitalize on over the next few years.

Of course, continued steady growth in the home improvement market will also be important. Home Depot's management believes the fundamentals of the industry, including household formation rates and average age of housing stock, are very supportive of long-term gains even if overall economic growth sputters around below-average rates.

Risks to hitting these targets include a surprise industry slowdown and rising competition from rivals focused on e-commerce . But if the retailer can navigate these and other challenges, as it has over the last five years, then dividends should closely track profits substantially higher by 2021.

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Demitrios Kalogeropoulos owns shares of Home Depot. The Motley Fool recommends Home Depot. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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


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

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