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HD increased dividend by 32.04%

HD, Home Depot increased the dividend by 32.04% making this dividend contender’s 10th consecutive year dividend increase.

The old dividend rate was 4.12 annual dividend payout (1.03 quarterly), the new rate is 5.44 (1.36 quarterly).

Our current fair value of the company is $210.25 a share so at the current price of $183.81 the stock is undervalued. In order for this stock to be marked a “buy” our three conditions must be met for us to buy the stock.

The three conditions that the stock must meet are:

1) in a correction mode – pass
2) the current stock price must be below a fair value – pass
3) the 5 year average dividend yield must be lower than the current yield – pass

Since all of the conditions are met, we mark it a “BUY”.

The current yield is 2.96%.

The 10 year YOC would be 17.59% with no dividend reinvestment and 33.34% with DRIP. This is a great dividend growth and it would reach 10% YOC in 10 years even without reinvesting the dividends. This makes this stock a great payer and dividend grower for matured portfolios already allowing an owner to redirect dividend stream to different stocks and still get a great dividend growth and YOC. The average 5 year dividend growth of this stock is of 21.90%.

The company share price outperforms the S&P 500 index in long term. If you invested 10,000 dollars in 1995 and held for the last 24 years, the stock average total return would be 15.09% vs 8.74% of the index, and your holding would grow to a staggering $275,944.40 dollars as opposed to $74,181.33 dollars of the index.

This makes this stock a great source of income in the long run, but also provides a good source of growth for your portfolio. I consider this stock a good addition for dividend portfolio accumulation and growth phase. If you are looking for both – dividend yield, dividend growth, and capital appreciation outperforming the index, then this stock is for you.

Note, that during accumulation phase, I recommend seeking both – the dividend growth and capital appreciation. If you are a retiree and plan on living solely from your dividends then you do not need capital growth and this income stock is a safe investment.

Disclosure: Currently, I am long HD shares. It is in our watch list and since it is now ranked as “buy” we may initiate a position in this stock in the near future (given, it still stays ranked as BUY at the time of purchase).

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