As the largest home improvement retailer in the country, Home Depot [NYSE: HD] has 2,200 stores in North America, and it is the number one choice for do-it-yourself hobbyists as well as professional contractors.
Strong leadership has allowed the business to ride out market highs and lows, resulting in quarterly earnings that have exceeded expectations for almost five years.
Home Depot [NYSE: HD] offers a diverse product line that ranges from raw materials to appliances, landscaping supplies, specialized home repair tools, and more.
What are the Risks of Investing in Home Depot?
Despite a strong history, Home Depot faces a certain level of risk, both in the short-term as well as the long-term.
Competition in this space may grow stronger, and Home Depot [NYSE: HD] must overcome the challenges of being part of the retail industry, as well as a synergetic association with the housing industry.
The company’s closest competitor, Lowe’s [NYSE: LOW], has pulled out all the stops to keep up with Home Depot, but so far, it has been unsuccessful. In fact, Lowe’s just announced that it is closing 51 stores in 2019.
It is interesting to note that Lowe’s does have a plan in place to regain lost ground – and that plan appears to be a page right out of Home Depot’s playbook.
In July 2018, the company hired Marvin Ellison for its open CEO position. Ellison is a former Home Depot executive. This may lead to more aggressive competition between the two home improvement giants.
As a retailer, Home Depot is not immune from the pressures of the growing trend towards e-commerce.
Stores have long relied on the unplanned purchases that shoppers make when they visit a Home Depot to keep sales figures high.
As more consumers turn to online shopping for everyday items, Home Depot is losing ground when it comes to sales of cleaning products, home repair supplies, and other add-ons that people pick up while browsing the aisles.
Unfortunately, e-commerce isn’t the only pressure Home Depot faces.
Though Home Depot is a retailer, sales are closely correlated to the health of the housing market. As a result, when construction and renovation slowed in the latter half of 2018 due to a rise in interest rates, Home Depot saw lower sales. This translated into lower earnings for investors.
Nonetheless, many analysts suggest that now is the time to buy Home Depot stock. It can be had for a relative bargain, and there are some indications that it may be headed for a rally.
Has Home Depot Stock Split Before – and Will Home Depot Stock Split Again?
From 1982 to 1999, Home Depot stock splits were highly active:
- 01/05/1982 3 for 2
- 04/12/1982 5 for 4
- 11/29/1982 2 for 1
- 06/01/1983 2 for 1
- 09/08/1987 3 for 2
- 06/14/1989 3 for 2
- 06/14/1990 3 for 2
- 06/05/1991 3 for 2
- 06/11/1992 3 for 2
- 03/24/1993 4 for 3
- 06/12/1997 3 for 2
- 06/11/1998 2 for 1
- 12/02/1999 3 for 2
Since the final split in 1999, there has been a lot of discussion among investors and analysts. Will Home Depot stock split again? If so, when?
Some thought this move would occur in 2018. The housing market was strong, and share prices were expected to reach $200 – a figure that Home Depot exceeded.
However, Home Depot has never relied on market norms to make this decision, and it didn’t split its stock in 2018.
Historically, most companies have chosen a two-for-one split around the $100 mark to manage pricing and reward investors.
As indicated by the Home Depot stock split history, the company bucked this tradition in favor of more complex ratios.
Home Depot’s intention behind the splits doesn’t appear to be an effort to keep share prices below $100, because in many cases, the splits occurred when share prices were already affordable.
The Decline of Home Depot Stock Splits
Since the last Home Depot split, there has been a general market-wide trend away from stock splits.
Several factors have contributed to this change. First, several major players in the Dow Jones Industrial Average have allowed their prices to creep up – in some cases, close to $300 per share.
Second, when stock splits were popular, trades were made in 100-share lots. Keeping the per-share price below $100 allowed more investors to purchase the required 100 shares.
The rise of discount brokers has made it possible for small investors to purchase odd numbers of shares, so the per-share price is less of a concern than it was 20 years ago.
These industry changes have reduced the pressure to split stocks, and Home Depot’s leadership has indicated a lack of interest in this strategy. While stock splits often result in a boost in positive sentiment, there is no intrinsic reward for investors.
Instead, Home Depot’s leadership stated that if and when it wants to create additional value for shareholders, it is more likely to look at repurchasing stock.
This is consistent with Home Depot’s most recent moves that included a 2017 repurchase of $8 billion in stock.
Is Home Depot Stock A Buy?
The current slump in share prices is good news for those who are thinking of purchasing Home Depot stock now.
Cold weather and economic uncertainty have impacted both the housing market and the retail industry, but there is every reason to believe that prices will perk up again.
Buying now means you could be on board when values increase – and those who already have Home Depot shares would be wise to wait for a boost before considering a sale.
In the meantime, investors can enjoy reliable Home Depot stock dividends, which have increased steadily every year.
The payout was $0.89 per share for each quarter in 2017, and it was $1.03 each quarter in 2018.
Many analysts expect to see another increase for 2019. For those focused on income investments, this is good news.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.