Home Depot (HD): Solid Dividend Stock

Home improvement retailer Home Depot (NYSE: HD) reported first-quarters of $0.43 per diluted share from its global operations, beating consensus estimates of $0.40 per share and topping earnings for the year-ago quarter by $0.13.

Revenues improved by 4.3 percent from the year-ago quarter to $16.9 billion, or 5.7 percent after adjusting for the EXPO store closings in first quarter 2009. Profit rose 41 percent to $725 million from $514 million.

“Our solid start to the year was driven by great performance in seasonal categories and strong growth in customer transactions,” said Frank Blake, chairman & CEO.

The worlds largest home improvement retailer revised guidance for fiscal year 2010 to $1.88, an increase of 21 percent over the prior year a 3.5 percent increase in sales for the year. The company previously reported a sales increase of 2.5 percent for $1.79 per share.

Same store sales were up by over 3 percent, but the average ticket price remained flat.

The stock was up by about $.32 to $35.91 in pre-market trading.

Comments: Another solid earnings report from Home Depot. HD improved its gross margin by 6.3 percent and its operating margin by an impressive 33.2 percent this quarter. Blake, the new CEO (as of 2007), is good for the company and the closings of EXPO and struggling HD Supply are the right moves. The company has good earnings, average debt, and a healthy dividend (about 2.66 percent at the current stock price).

As mentioned yesterday in the Lowe’s analysis, HD’s fortunes are anchored to an expanding economy and uncertain housing market. The stock is up by almost 23 percent since the beginning of the year so upside may be limited. On the other hand, the stock held support at about $34 so downside risk looks minimal. Plus you are not likely to see a lot of volatility in this stock if you are looking for a solid dividend stock, this could be a top choice.

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Disclosure: No Positions