Home Depot
operates a chain of retail building supply/home improvement stores in the US ,
Canada , Mexico
and China . The company has grown profits and dividends
at a 7-20% pace over the past 10 years earning 14%+ return on equity. HD experienced difficulties in the 2007-2008
economic downturn; however, the company took steps that have led to improvement
in its profitability. This trend should continue as a result of:
(1) altered its
in-store focus designed to maximize profitability and to make them simpler,
more customer friendly,
(2) the
company’s size and dominant market position in a highly fragmented industry
allows it to achieve economies of scale in purchasing products and to develop
exclusive brands with selective suppliers giving it a competitive advantage,
(3) improving
housing market,
(4) share
buybacks.
Negatives:
(1) it is in a
highly competitive industry,
(2) a high
unemployment rate will keep a damper on consumer discretionary spending,
(3) its
international exposure increases the risk of losses from currency fluctuations.
Home Depot is
rated A++ by Value Line, carries a 43% debt to equity ratio and its stock
yields 2.1%.
Statistical Summary
Stock Dividend Payout # Increases
Yield Growth Rate Ratio
Since 2003
HD 2.1% 16% 46% 8
Debt/ EPS Down Net Value Line
Equity ROE Since 2003 Margin Rating
HD 43% 45% 3 7% A++
Chart
Note:
HD stock made great progress off its March 2009 low, quickly surpassing the
downtrend off its July 2007 high (red line) and the November 2008 trading high
(green line). Long term the stock is in
an uptrend (straight blue lines).
Intermediate term it is an uptrend (purple lines). Short term it is in a trading range (brown
line). The wiggly blue line is on
balance volume. The Dividend Growth and
High Yield Portfolios own full positions.
The upper boundary of its Buy Value
Range Sell Half
Range
10/13
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