Home Improvement Dividends - Home Depot (HD)

It sounds impressive when you are able to make the claim that you are the fastest retailer in the US to reach $30bn, $40bn, $50bn, $60bn and $70bn in annual sales.

This is one of the facts that make retailer Home Depot (HD) one of the most promising investments for investors seeking a growth play which pays a consistent dividend. Founded in 1978 Home Depot Inc. (HD) is the world's largest home improvement specialty retailer selling a variety of building materials and garden products. It is also the fourth largest retailer in the United States and has more than 2,000 retail stores in the United States, Canada, Mexico and China.

Presently trading on a price to earnings multiple of 17 times earnings the company offers investors a yield of around 2.7%.

On the dividend front the company has a proud history having returned capital to shareholders every year since 1987.

One of the primary reasons for this consistent dividend story is the ability of the group to generate strong and consistent cash flows. In 2009 the company generated $5.1bn of cash flow from operations.

This performance has continued into the new financial year.

Home Depot (HD) reported third quarter earnings of $834m or $0.51 per share which was up on the earnings of $689m or $0.41 per diluted share reported for the same period last year. For the first nine months of the year the company had delivered just shy of $4bn in cash from operations and when the company released further earnings guidance in December 2010 it indicated that it expected this figure to be around $5.4bn despite $1.3bn in capital expenditure.

Home Depot (HD) is also targeting $2.5bn in share repurchases over the next year which should be earnings enhancing. Third quarter sales reflect the fourth consecutive quarter of positive same store sales for the business. As the business stabilizes, financial performance continues to improve.

Home Depot (HD) was a natural recipient of the housing boom across the US as consumers invested in their properties, but investors should not lose sight of the fact that the strong results continued in 2008 and 2009 when the market slumped.

There are early signs that the global economy is turning the corner and consumers are now looking to use some of their leftover money to start investing again and Home Depot’s (HD) market leading position and strong cash flows make it a potential play for investors seeking a combination of growth and ongoing dividends.