The big financial crisis of 2008 and 2009 resulted in what many consider to be the greatest housing bear market in history. Revenue growth has slowed to a negative 20%, yet it is still insufficient to preclude Home Depot stock (NYSE:HD) from producing positive free cash flow.
In other words, the corporation was still making money. During those difficult years, management decided to freeze the dividend, although stockholders were nonetheless paid.
The optimistic message is that the organization has shown its ability to function in both good and difficult times. Because dividend stocks will have ups and downs over a longer holding period, this is a critical characteristic. Home Depot seems to suit the bill.
Home Depot Stock: The Dividend is Supported By Solid Financials.
Having a constantly increasing and consistently successful corporation is one thing, but how management spends those earnings is another. A dividend company should pay and enhance its dividend consistently, but it should do it responsibly; borrowing to pay it or having an excessive payout ratio is a formula for catastrophe.
As seen here, Home Depot’s cash earnings easily cover the dividend. The dividend payout ratio is 68%. It’s been lower in recent years, but there’s still plenty of wiggle space in case the industry falls. Dividend growth has been strong for investors, with the firm increasing it by an average of 17% each year over the last five years. That may slow to make the payout ratio reasonable. Still, high-single-digit dividend growth is very possible if Home Depot’s sales continue to expand.
If Home Depot’s earnings decrease, the firm has alternatives for keeping its dividend alive. Its balance sheet is strong, with a leverage ratio of only 1.4 times debt to EBITDA. I consider anything less than 2.5 to be good, so the company’s strong financials should provide investors with some extra piece of mind.
Should You Buy Home Depot Stock Right Now?
Home Depot stock (NYSE:HD) is a well-liked stock that seldom suffers significant losses. Outside of the COVID-19 collapse in 2020, the stock’s (NYSE:HD) 34% drop from its highs is the second-largest in ten years. The stock’s current price-to-earnings (P/E) ratio is 16.7, which is already a significant discount from its 10-year median P/E of 22.
This firm is unlikely to disappear, and the market is providing investors with a bargain on a blue-chip stock ready to continue paying and boosting its dividend. Home Depot stock (NYSE:HD), a potential future Dividend Aristocrat, should be on every dividend investor’s shopping list, particularly if the stock price continues to plummet in the months ahead.
Featured Image- Megapixl @ 1miro
Author Okoro Chinedu 
