Home Depot's share is a preferred investment for several leading Dividend Exchange-Traded Funds (ETFs).
Exchange-traded funds (ETFs) typically hold numerous shares, often exceeding 100. This extensive portfolio attribute contributes to making them well-diversified investments, helping lessen risk.
Interestingly, Home Depot (HD, 0.18%) is quite popular within various high-performing dividend ETFs. The company finds a place in the top ten holdings of three notable ETFs: Vanguard Dividend Appreciation ETF (VIG, 0.66%), Vanguard High Dividend Yield ETF (VYM, 0.69%), and Schwab U.S. Dividend Equity ETF (SCHD, 0.66%). Let's dive deeper to understand why Home Depot is so sought-after within these top ETFs.
Popular holding status
The Vanguard Dividend Appreciation ETF follows a specific index, the S&P U.S. Dividend Growers Index, which mainly focuses on large-cap stocks that exhibit a history of enhancing their dividends. The index itself consists of more than 330 stocks, with Home Depot being one of the leading holdings, holding a 2.1% share of the ETF's assets.
The Vanguard High Dividend Yield ETF is another earmarked ETF from Vanguard, concentrating on dividend stocks. This ETF was created to track the performance of the FTSE High Dividend Yield Index, which gauges the earnings of stocks that boast high dividend yields. The current dividend yield of this ETF is 2.5%, exceeding the S&P 500's 1.2% and even surpassing the Vanguard Dividend Appreciation ETF's 1.6%.
Despite its substantial roster of stocks, Home Depot has managed to climb the ladder in this ETF. It now stands as the fourth-largest holding at a 2.2% share of the ETF's assets.
Lastly, we arrive at the Schwab U.S. Dividend Equity ETF. This ETF employs a more selective strategy, targeting the Dow Jones U.S. Dividend 100 Index, which measures the returns of 100 dividend-yielding stocks that have demonstrated consistency in paying dividends. Home Depot stands in this more exclusive group of dividend stocks, accounting for 4.4% of the ETF's assets.
The reasons behind dividend ETFs' love for Home Depot
Home Depot's allure for these dividend ETFs can be attributed to several factors. First, Home Depot distributes a higher-yielding dividend of 2.2%, making it an appealing choice for ETFs that prioritize yield, such as the Vanguard High Dividend Yield ETF and Schwab U.S. Dividend Equity ETF.
Second, the company boasts an impressive track record of dividend payment. It has disbursed more than 150 consecutive quarterly dividends. This is noteworthy, as it has also grown its dividend for a remarkable 15 consecutive years, including boosting its payout by 7.7% recently.
Home Depot's strong financial standing enables it to continue providing a steady growth in dividends. The company has amassed a net cash inflow of over $15 billion from its operating activities in the first nine months alone this year, more than doubling its aggregate dividend payout of $6.7 billion. This excess capital was primarily used to finance growth-oriented projects, such as expanding its store footprint and bolstering its robust financial position, rated with an A grade. This financial strength allowed Home Depot to successfully acquire SRS Distribution in a $18.3 billion deal this year, which consequently expanded the company's existing $500 billion market opportunity to over $1 trillion. With an estimated market share of 15%, Home Depot has substantial room for further expansion.
The company's ability to increase sales at its existing stores and further expand its retail presence should empower it to enhance its revenue and earnings manifold, ultimately resulting in a continued expansion of its dividend payments.
Given Home Depot's strong performance and dividend growth, it's no surprise that individuals and funds interested in finance and investing, specifically in the area of money management and finance, might consider investing in ETFs that hold Home Depot shares. Here are two sentences that contain the words you provided and follow from the text:
In light of Home Depot's high dividend yield and consistent dividend growth, many investors and finance experts may choose to allocate some of their investment funds into ETFs that invest in Home Depot stocks.
Given Home Depot's position as one of the top holdings in various dividend ETFs, those with an interest in finance and investing might consider researching the specific ETF's investment strategy and objectives to determine if it aligns with their own investment goals and risk tolerance.
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