Here’s Why Home Depot Will Continue To Pay High Dividends

With a positive macro-economic environment and higher sales due to the success of its online channel, Home Depot (NYSE:HD) has registered strong growth in the past few years. The company has increased its dividend payment over the last few years and we expect this trend to continue in the future.

Home Depot’s growth in the past few years has come from its online channel, leading to lower capital expenditure driving higher revenues. In Q1 2017, the company saw a 23% increase in online sales and e-commerce now accounts for 7% of Home Depot’s total sales. (Read Here’s How Home Depot’s E-Commerce Strategy Is Driving Growth). The company has generated significant additional revenues without opening any new stores in the last three years. This model has made Home Depot’s business extremely efficient, generating higher cash over the years. The company has been returning this cash to its shareholders in terms of higher dividends and share buyback programs.

The chart below shows how the company has been steadily increasing its cash flow from operations with improving operating margins and a steady capital expenditure.

Home Depot is successfully executing a strong growth model which will allow the company to grow revenues and take advantage of the strong industry environment. As the company generates strong cash flows and uses limited capital for growth we believe it will continue paying strong dividends and maintain its share buyback program for the next few years.

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