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The two companies remain committed to paying dividends.
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Paying dividends remains one of Home Depot’s top capital allocation priorities.
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Target recently raised its dividend, running its streak to 54 years.
Many investors think about a stock’s appreciation potential. But those looking to receive a regular income can also find equities to invest in. In fact, it’s one of the ways you can earn passive income.
Of course, you still have to do your homework. That’s especially true when you have an investment time horizon measured in decades. These two stocks have a history of raising payouts year after year and higher dividend yields than the market, as measured by the S&P 500 index.
The stocks also offer potential price appreciation, making them ideal for patient investors seeking attractive total returns.
Home Depot (NYSE: HD) produces the highest sales among home improvement retailers. This ubiquitous presence, combined with attractive prices, makes it a popular shopping destination for individuals and professional contractors.
Home Depot’s sales have been sluggish lately. But that’s because homeowners have been putting off major projects due to factors like high interest rates that have raised the cost of borrowing, and inflation eating away at their spending power.
The company’s fiscal second-quarter same-store sales (comps) increased 1%, although foreign currency translations subtracted 0.4 percentage points. Broken out, traffic took away 0.4 percentage points, while spending added 1.4 percentage points. The period ended Aug. 3.
I’m confident that homeowners will conduct major renovations, out of necessity or the desire to change their homes. It’s merely a question of timing. When they do, it seems likely that they’ll go to Home Depot given its convenience and price advantage.
In the meantime, paying dividends remains one of management’s top capital allocation priorities. It comes right after investing in growth initiatives.
The board of directors has increased the payout every year since 2010. Even during the challenging years of the Great Recession, Home Depot kept its quarterly dividend constant.
Currently, the company has plenty of free cash flow (FCF) to support dividends. Home Depot produced $7.2 billion in FCF during the first half of the year compared to $4.6 billion in dividends.
The stock has a 2.3% dividend yield, more than 1 percentage point higher than the S&P 500’s 1.2%.
Target (NYSE: TGT) became a popular shopping destination for consumers looking for basic items and differentiated merchandise sold exclusively at its locations. It proved a successful formula for a long time, but the company’s sales have been impacted by several factors over the last few years.
