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Home Depot: A Corporate History

In 1978, five businessmen founded their vision of a home improvement superstore, a niche that really was yet to be filled in the United States. Local hardware stores were much more common back then, but this group saw a gap in the home improvement market. The first two Home Depot (NYSE: HD) stores were built in 1979 in Atlanta, Georgia, where the company is now headquartered. Little did anybody know that this was the start of a company that would change the retail landscape forever in America and would eventually grow to become one of the world’s most recognizable brands.

The group of Home Depot's founders was led by Arthur Blank, the current owner of the NFL's Atlanta Falcons and Atlanta United of the MLS. The other co-founders included Bernard Marcus, Ron Brill, Pat Farah, and Ken Langone. Soon after opening stores in Georgia, Home Depot expanded into neighboring states like Florida, and then eventually to states like Texas. Believe it or not, Home Depot's rapid expansion put it into some financial difficulties that saw falling earnings, rising debt, and a plummeting stock price.

Despite all of these difficulties, Home Depot persevered, and by 1989 it was the largest home improvement store in the country. This meant that it had surpassed its chief rival Lowe’s (NYSE: LOW), and by 1994, Home Depot had entered the Canadian market via its acquisition of Aikenhead’s Hardware. By 1995, Home Depot was operating over 350 stores in the two countries, while recording total sales of over $10 billion annually.

Throughout the 2000s, Home Depot grew even faster, mostly through the acquisition of its peers. In 2002, Home Depot officially entered Mexico, via the acquisition of the Mexican hardware chain Del Norte. Home Depot’s expansion was fast and furious but for a time, the stock struggled, as the cost of scaling a major enterprise weighed on the company. In 2007, Home Depot and then CEO Rober Nardelli mutually agreed to part ways, and his severance package of $210 million was a point of contention amongst shareholders.

Today, Home Depot operates over 2,300 stores across North America and is unquestionably one of the leading retail brands in America. In 2021, the company made over $151 billion in revenue, and as of the start of 2022, it had nearly 500,000 employees. Current CEO Ted Decker replaced long-time CEO Craig Menear at the start of 2022.

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A History of Home Depot’s Stock

Home Depot currently trades on the New York Stock Exchange but the company IPO’d on the NASDAQ exchange back in 1981. The offering allowed the company to raise over $4 million, which seems incredibly low given the size of the company now. Home Depot moved over to the New York Stock Exchange in April 1984. Needless to say, those who have held the stock since the early days are up over 260,000% and this does not even include reinvested dividends.

It took only fifteen years for Home Depot to be added to the Dow Jones Industrial Average in 1999. The stock is also a component of the S&P 500 and the S&P 100. According to Yahoo! Finance, Home Depot has institutional ownership of 71.08%, which is significant considering it has over 1.02 billion shares outstanding. Only 0.85% of the float is held in short positions, which shows how respected Home Depot is as a stock by both short sellers and institutional investors.in the amount of $744 million.

The stock hit an all-time high price of $420 in December 2021 but has fallen by nearly 30% since then. Still, the stock is the third largest component in the price-weighted Dow Jones Industrial Average, behind only UnitedHealth Group (NYSE: UNH) and Goldman Sachs (NYSE: GS).

Home Depot Dividend History

Home Depot's stock is known for its strong performance in both bear and bull markets. It is also known across Wall Street for its strong dividend payouts to shareholders. Home Depot has paid out a quarterly dividend every year since 1987 without any interruption. This includes market crashes like the Dot Com bubble, the Global Financial Crisis, and the COVID market crash in 2020.

Today, Home Depot's stock pays out an annualized dividend yield of about 2.62% with a five-year average yield of 2.16%. Home Depot is not a dividend aristocrat, because it did not raise its dividend during the Global Financial Crisis, although it did maintain the yield and distributions through that time. If it weren't for that one year, Home Depot would have long been a dividend aristocrat and well on its way to becoming a dividend king.

What does the Future Hold for Home Depot?

You would be hard-pressed to find too many investors that wouldn’t consider Home Depot as a good investment. To be fair, the company saw unprecedented growth during the pandemic as it was named an essential retail outlet, and at one point was one of the few stores that were open. Home Depot has had difficulty matching those year-over-year comparisons but as we move further out from 2020, the comparisons will be a lot more realistic.

Holding a stock like Home Dept provides instant stability to your portfolio. The company itself is a cash-generating machine which explains why its dividend yield is always so generous. Home Depot is a strong business that seems nearly irreplaceable in our economy. On top of that, the dividend is amongst the best on Wall Street and with a payout ratio of only about 43%, the company has plenty of room to keep increasing its dividend for years to come.