Home Depot Leaves The Door Open To A Dividend Increase
Home Depot (NYSE: HD), the largest home improvement retailer in the world, said it has $2.7 billion in cash as of November 1 and the company isn't content to let its warchest sit in a bank earning piddly amounts of interest. The Dow component had taken a two-year break from repurchasing its own shares, but resumed buybacks in the third quarter, spending $98 million to purchase 3.6 million of its own stock.
Chief Financial Carol Tome called Home Depot a “cash cow” and said the company will use some of that excess cash to pay $750 million in debt in the fourth quarter and refinance $1 billion in debt coming due in August 2010. Tome also said the company will evaluate further share repurchases AND dividends as ways to return value to shareholders and an update on both fronts may be given when Home Depot updates earnings guidance in February.
Currently, Home Depot pays a quarterly dividend of 22.5 cents a share, which works to a payout ratio of 60% based on 2009 earnings estimates. That's well above the 30% payout ratio Home Depot views as normal, but below its five-year average of above 80%. Home Depot has a five-year dividend growth rate of 26.85%.
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