Home Depot's fiscal second-quarter comps grew just 1.7%, yet adjusted earnings per diluted share climbed 5.1% year over year to $4.92. High interest rates have kept homeowners from starting major renovations, but the retailer's scale and 2.9% dividend yield keep it in view for patient investors.
Home Depot reported fiscal second-quarter results for the period that ended Aug. 2: same-store sales rose 1.7%, including a 1.3% gain in the United States. Management guidance calls for comps to stay flat to up 2% for the rest of the year, with no acceleration expected.
Despite the sluggish top line, adjusted earnings per diluted share increased 5.1% year over year to $4.92. When sales growth improves, the bottom line should grow at a faster pace.
Why renovations are on hold
High interest rates have made borrowing more expensive, both for home purchases and for the renovations that often follow a move. Homeowners have been holding back on major projects as a result.
When those homeowners are ready to act, they're likely to turn to Home Depot, given it's the largest home-improvement retailer and offers convenience and low prices. The stock traded at $321.05, up 0.94% on the day, with a market cap near $320 billion.
Dividend still stands out
Home Depot's 2.9% dividend yield compares with 1.1% for the S&P 500, a gap that keeps the stock attractive for total-return-focused investors even while sales growth stays muted. The combination of a growing dividend and a business still generating profit growth despite soft comps supports the case for patience over a full renovation-spending rebound.
Source: The Motley Fool
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