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The Terrific Ten: The Foundation For My Dividend Growth Portfolio (Part 2)

May 25, 2023 7:00 AM ETThe Home Depot, Inc. (HD), TSMLOW151 Comments


  • Of the nine companies (an ETF is on the list) on our Terrific Ten list, eight are rated as narrow or wide moat by Morningstar.
  • All of the Terrific Ten notched total returns that beat the S&P 500 Index over the last five years.
  • In fact, excluding dividends, the Terrific Ten more than doubled the return for the S&P 500 over the last five years.
  • Looking for more investing ideas like this one? Get them exclusively at iREIT on Alpha. Learn More »

Big Ten 3D monument


This article was published at iREIT on Alpha on Tuesday May 23, 2023. This article was coproduced with Chuck Walston.

Although I am invested in roughly 125 companies, the Terrific Ten comprise nearly a quarter of my portfolio. I suspect

This article was written by

Brad Thomas profile picture

Brad Thomas has over 30 years of real estate investing experience and has acquired, developed, or brokered over $1B in commercial real estate transactions. He has been featured in Barron's, Bloomberg, Fox Business, and many other media outlets. He's the author of four books, including the latest, REITs For Dummies.

Brad, with his team of 10 analysts, runs the investing group iREIT® on Alpha, which covers REITs, BDCs, MLPs, Preferreds, and other income-oriented alternatives. The team of analysts has a combined 100+ years of experience and includes a former hedge fund manager, due diligence officer, portfolio manager, PhD, military veteran, and advisor to a former U.S. President. Learn more

Analyst’s Disclosure: I/we have a beneficial long position in the shares of HD, TSM either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Author's note: Brad Thomas is a Wall Street writer, which means he's not always right with his predictions or recommendations. Since that also applies to his grammar, please excuse any typos you may find. Also, this article is free: Written and distributed only to assist in research while providing a forum for second-level thinking.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (151)

Bucknfl profile picture
HD is my largest holding. It could easily be back over 400 in a year.
@Bucknfl My largest also, remember 420$ high,bght.@ 25c shr.in 1986.
Brad, I know everyone does this, but I'd like to put in a vote for KLAC. I've been very happy with this stock and it's a huge dividend-growth engine. Ditto for LRCX (Lam). I know these are considered cyclical (no more so than Taiwan Semi, perhaps), but they're essential industries and actually very stable.
The fact is, there are many great stocks out there. And many awful ones. It's not that hard to distinguish between them. HD is certainly one of the great ones. Taiwan Semi is also great but has a wall of geopolitical risk.
Brad Thomas profile picture
@Doggywag Thanks.... I'll take a look at KLAC!

Please check out my weekend blog...

Whew! I'm Finished seekingalpha.com/...
495783 profile picture
Too bad HD has a DER of only 27.65 according to Finviz.com!
The last decade is not what the next will be.
Miguel Lorca profile picture
@fifth.green What will the next decade be like?
@Miguel Lorca lost decade, our country is so divided we will go bwds!
lateralgs profile picture

I won’t dispute the fact the country is extremely divided. But exactly how do you equate that to a lost decade in the investment arena?
Miguel Lorca profile picture
@Brad Thomas I was hoping you would have given your opinion on HD's debt issue. Both HD and LOW have high debt. Is that a concern?

HD is a long term holding for me and adding.
@Miguel Lorca I'm an HD stk. holder since 1986 @ 23c shr @ one time owned LOW also , just own HD now,sold 80% in 2019 to diversify still have 3800 + shrs the divy is 32k$ + per yr. my grandsons will get when I croak so I don't have to pay taxes on it.
Miguel Lorca profile picture
@tjustice Wow! That's a nice long time to own HD or any good stock for that matter. Also, a great example of how well dividend stocks can be for building wealth.

I owned LOW for some years but also just ended up with HD for the long term. More for personal reasons than anything else. Just prefer shopping at HD over LOW.
TechSales profile picture
I wish that I would have understood the power of dividend growth 15 years ago, but it's never too late! One of my eye opening lessons is Waste Management. I bought WM 7 years ago in April 2016. The position is up 182% and with the dividends reinvested, the position is up 301%. Dividend Growth Rate 5Y (CAGR) is "only" 8.78%. I'll take it!
Brad Thomas profile picture
@TechSales Very nice! Thanks for taking your time to read.
ConnorGraham profile picture
@TechSales It's a powerful thing, glad I'm learning about it in my early 20's.
@TechSales except you can come up with hundreds of theories and stocks that would of been better than you did.
NickFX profile picture
Great Article!
@Brad Thomas What is this, elementary school?
Looks like the great Oracle of Omaha pulled the trigger a little too soon
@Drewworm when you got a whole stockpile of dry powder, it does not matter. Warren Buffett's company reported that it now sits on $130.6 billion. I did not even hear the click of the trigger.
HunterKiller89 profile picture
So many comparisons of Lowes and HD.....am I the only one who finds them to be near carbon copies of each other? As a consumer at least? I frequent both chains, for decades now, and would be hard pressed to make a case for a particular brand over just using whatever is closest
ConnorGraham profile picture
@HunterKiller89 I would agree that as a customer it is a pretty similar experience.
@HunterKiller89 lowes give vets a discount.
mslegacy profile picture
@fifth.green , so does Lowes.
Thanks Brad! Good to see HDs PEG go down.
Brad Thomas profile picture
@kirbyryan Thanks for reading All the best.
Retire2020 profile picture
Recently our washer gave up on me. My wife and I made a trip to the nearby HD to look for a replacement. After not finding the sales associate for appliances, I asked around and one gentleman point me to him. However, the sales associate seems more interested talking with his colleagues than attending to us. We left and went to Lowes and got our replacement washer. If my experience is an example of what HD service is or going to be, then I think HD will not stay on top much longer. (Disclaimer: I own neither HD nor LOW).
Brad Thomas profile picture
@Retire2020 Thank you for contributing, have a great day!
@Retire2020 - here’s an example of how I use both. Yes I too prefer Lowe’s Appliance dept but I prefer the Paint dept at Home Depot.
@Retire2020 Have friends who worked at HD, they hated it. Lowes pays a better wage and has better benefits. Like Costco versus Sams Club. You can see the "aura' of the workers are much brighter and happier at the latter. Plus Sam's is pushing almost zero person to person checkout.
Your chart shows the main reason China wants to invade Taiwan: it would have a stranglehold on the world's chip supply. If they do, what do you think the effect would be on the U.S. economy when they cut us off?
ConnorGraham profile picture
@59roamer Definitely a concern, it would 100% have an effect on our economy but its difficult to know to what degree.
@59roamer That's why nobody will let it happen; especially Japan.
aschwaller1 profile picture
I prefer LOW over HD only because I shop at LOW. I get a discount or subsidy of some sort every time I shop there. I hope to set up a similar symbiotic relationship with United Healthcare stock and my supplemental Medicare payments.

Not sure about the exact benefits but as the stocks prosper or I collect dividends, there are benefits. Maybe a subject for a future article for you. Hope you are well. Andy
Chuck Walston profile picture

I literally drive by Home Depot on my way to Lowes. Reason? Because Lowes provides a veterans discount.

Hope you and yours are well, Chuck
maudie profile picture
@Chuck Walston so does HD
Chuck Walston profile picture
Gotcha, however, I provided my DD214 to both retailers. Lowes kept my info on file and gives me a discount by simply typing in my phone #. HD gave me a temporary discount. Not going to jump through hoops again for HD when LOW takes care of me.
Chuck Walston profile picture
AVGO, a stock highlighted in the first Terrific Ten article, up nearly 8% since that piece debuted last week.
@Chuck Walston

Yup nice huge semi-conductor pop going on across the board! I own the Semi-conductors ETF - has the likes of TSM, AVGO, ASML, AMD, NVDA in it.

I had decided to hold the basket though I still own some of individual AVGO stock because of their div + div growth.
Chuck Walston profile picture

I own a handful of ETFs, but most don't grow divvys like my DGI portfolio. However, I definitely understand why many prefer ETFs.
Retire2020 profile picture
@Chuck Walston Respectfully, AVGO is up, not because of the article but from an Apple's deal.
chkm8k2 profile picture
I missed the Fast Graphs analysis you usually supply. Are these a good buy at current pricing?
Chuck Walston profile picture
TSM shares up over 9% this morning.
Fred Pollack profile picture
I subscribe to the English version of Digitimes (Taiwan based). Before I can see the English-based articles, I get the headlines for the coming ones. Here are the TSM headlines (with 1 line key message) that I now see:

AI chip boom to drive TSMC revenue growth in 2023
A boost in demand for AI chips may help TSMC sustain its annual revenue increase this year, according to market observers.

Nvidia orders lifting TSMC 5nm fab utilization
Nvidia's influx of orders requiring SHR (super hot run) has increased capacity utilization rates for TSMC's 5nm process platform, which are close to reaching full capacity, according to industry sources.
Note: nVidia's H100 is produced on TSMC's 4nm process technology (which is considered part of the 5nm family). Google's TPUv5 (successor to TPUv4, on 7nm) is also on 4nm. AMD's coming MI300 graphics/AI chip is also on 5nm.

Also, from a Digitimes article on May 15th, (Title: "Apple devices to occupy 90% of TSMC 3nm capacity in 2023"), "The sources said that of four iPhone 15 series models set for launch in September, two premium devices reportedly will feature A17 APs built using TSMC's N3B process and another two models will adopt 4nm technology." In 2023, 3nm will only be 4-6% of TSMC's revenue. The ramp of 3nm will be in 2024 with the N3E process.

Disclosure: TSM is a long-time long for me, and is an overweight in my portfolio. I also own UMC - even more undervalued than TSM, and pays a higher dividend rate, but it is more speculative. UMC is not understood by US investors and most analysts, in my opinion.
Chuck Walston profile picture
@Fred Pollack

Thanks for adding to the conversation.
ItsPlaytime profile picture
@Fred Pollack Xi does not care about all that. He wants Taiwan. And if getting Taiwan cuts off the US from chips China is currently blocked from having, Xi loves that even more.
Fred Pollack profile picture
@ItsPlaytime An invasion of Taiwan will not just shut down the TSMC's manufacturing, but also that of the other semi foundries in Taiwan as well. The net result will be a worldwide depression, with China suffering the worst. Xi knows this.
Well managed company HD, should be a core holding in any portfolio.
Brad Thomas profile picture
@Money 29 Thank you for reading.
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