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The Home Depot logo is seen on a shopping cart outside its store May 30, 2006 in Chicago, Illinois. (Photo by Tim Boyle/Getty Images) Getty Images Home Depot (HD) has quietly built a reputation not just as a home improvement giant, but as one of the market’s most consistent wealth creators. While investors often focus on growth stories in tech or energy, the Atlanta-based retailer has been funneling extraordinary amounts of cash back to its shareholders year after year. Over the past decade, HD stock has returned a remarkable $130 Bil to its shareholders through tangible returns in the form of dividends and buybacks. Let’s examine some figures and see how this payout capacity compares with the leading capital-returning companies in the market. Interestingly, HD stock has delivered the 14th highest total to shareholders in history. payout capacity metrics Why should you care? Because dividends and share repurchases provide direct, tangible returns of capital to shareholders. They also indicate management’s confidence in the financial stability of the company and its ability to produce sustainable cash flows. There are also other stocks that exhibit similar traits. Here is a ranking of the top 10 companies based on total capital returned to shareholders through dividends and stock buybacks. MORE FOR YOU Stock prices can experience volatility, but the markets are not exempt either — 2008, 2020. Fluctuation is part of the equation. Discover how Trefis’ Boston-based wealth management partner managed allocations during both instances. Shareholder return metrics For the complete ranking, visit Buybacks & Dividends Ranking What do you observe here? The total capital returned to shareholders as a percentage of the current market capitalization seems inversely proportional to growth potential for reinvestments. Companies such as Meta (META) and Microsoft (MSFT) are expanding much more rapidly and predictably compared to others, yet they have returned a lower proportion of their market cap to shareholders. That’s the flip side of high capital returns. While they are appealing, you must ask yourself: Am I trading off growth and solid fundamentals? Keeping that in mind, let’s analyze some figures for HD. (Refer to Buy or Sell Home Depot Stock for further information) Home Depot Fundamentals Revenue Growth: 8.5% LTM and 2.2% last 3-year average. Cash Generation: Nearly 8.6% free cash flow margin and 13.1% operating margin LTM. Recent Revenue Shocks: The lowest annual revenue growth over the last 3 years for HD was -1.8%. Valuation: Home Depot stock is valued at a P/E ratio of 25.7 Other financial metrics This overview is useful, but assessing a stock from an investment outlook requires much more detail. That's precisely what Trefis High Quality Portfolio aims to achieve. It is structured to minimize stock-specific risk while offering potential upside. HD Historical Risk Home Depot is not immune to significant sell-offs. It declined around 52% during the Dot-Com Bubble and 54% in the Global Financial Crisis. More recent shocks, such as the 2018 correction and the COVID pandemic, also led to declines of 25% and 38%, respectively. Concerns over inflation resulted in roughly a 35% decrease. Strong fundamentals are significant, but these figures illustrate that even robust stocks can face considerable declines when markets turn adverse. However, the risk extends beyond major market crashes. Stocks can decrease even in bullish markets — consider events like earnings reports, business updates, and changes in outlook. Review HD Dip Buyer Analyses to learn how the stock has rebounded from sharp declines in the past. The Trefis High Quality (HQ) Portfolio, comprising 30 stocks, has a proven track record of consistently outperforming its benchmark, which includes all three indices — the S&P 500, S&P mid-cap, and Russell 2000. What accounts for this? On the whole, HQ Portfolio stocks have achieved better returns with less risk when compared to the benchmark index; a more stable investment experience, as demonstrated in HQ Portfolio performance metrics. Editorial StandardsReprints & Permissions
