Portfolio Update
The FiveTwenty portfolio received $459.77 in dividends in the past week. ADM, AFL, BKH, ENB, FTS, INTC, SJM, SWX paid their quarterly dividends during the week.
| Past Week Dividend | $459.77 |
| Current Quarter Dividend (Q1 2023) | $1,206.64 |
| LifeTime Dividend | $9,315.08 |
| Estimated Annual Dividend | $8,100.87 |
The capital allocation for the week of 03/05/2023 to 03/11/2023 will be used to add to our position in Home Depot (NYSE: HD).
Decrease in Estimated Annual Dividend
The decrease in the Estimated Annual Dividend from last week is due to the fact that we closed out our position in INTC. The proceeds from the sale will be redeployed as part of our weekly capital allocation in accordance with the mechanics outline in our strategy.
HD – Position Update
Since our last check-in on HD in week 45 of 2022, the company reported Q3 2022 earnings on 11/15/2022, and Q4 and FY 2022 earnings on 02/21/2023. The share price increased 5.1%from $284.03 to $298.45 during the period.
| TTM | Prev. Update | 10-year median | |
| Dividend Streak | 14 years | 13 years | |
| Yield | 2.55% | 2.61% | 1.98% |
| Payout Ratio | 45.56%1 | 45.18%2 | 43% |
| P/E | 17.891 | 17.462 | 22.35 |
1 computed using TTM EPS of $16.69 as of Q4 2022
2 computed using TTM EPS of $16.27 as of Q2 2022
FY 2022 earnings report
Did HD’s latest earnings report raise any warning flags?
FY 2022 was another record setting year for HD financially. Revenues grew 4.1%, net income increased 4.1%, and EPS were 7.5% higher. The company saw an increase of comparable sales of 3.1% worldwide and 2.9% in the US.
| Revenue (in millions) | Net Income (in millions) | EPS . | |
| 2021 | $151,157 | $16,433 | $15.53 |
| 2022 | $157,403 | $17,105 | $16.69 |
| % Change | 4.1% | 4.1% | 7.5% |
Additional noteworthy developments during the quarter:
- As part of the earnings release on 02/21/2023, HD declared a quarterly dividend of $2.09 per share payable 03/23/2023 to shareholders of record on 03/09/2023. This represents a 10% increase over the previous quarterly dividend.
- The company also announced that it will invest an additional $1 billion in FY 2023 in additional compensation for frontline and hourly associates.
Looking ahead, HD forecasts FY 2023 comparable sales growth to be approximately flat compared to FY 2022. It also sees EPS decline in the mid-single digits for the year.
Thesis
Why are we adding to our position in HD?
Following the FY 2022 earnings release, HD shares have pulled back slightly due to the cautious and disappointing guidance for FY 2023. We regard the pullback as an opportunity to add to our position before the Q1 2023 ex-dividend date.
Additionally, the 10% dividend increase is a welcome signal from management that they have confidence in the near-term growth prospects of the company.
Previous Articles
- 2022 Week 45: Home Depot (NYSE: HD)
- 2022 Week 39: Home Depot (NYSE: HD)
- 2022 Week 35: Home Depot (NYSE: HD)
- 2022 Week 34: Home Depot (NYSE: HD)
Photo by Oxana Melis on Unsplash