Forget Coca-Cola, Home Depot Is a Better Dividend Stock

Finding a good dividend involves more than just screening for high yields and long track records of annual payout raises. Many blue chip businesses would show up in that search, but only a few of these stocks will end up generating the type of market-thumping returns that income investors are reaching for.

That fact shines through when stacking up two Dow giants, Coca-Cola (NYSE:KO) and Home Depot (NYSE:HD). While the beverage titan has plenty of attractive investment qualities, Home Depot looks like the better dividend stock right now.

A couple shopping for appliances.

Image source: Getty Images.

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Sure, Coca-Cola pays a higher yield today, at over 3% compared with Home Depot’s 2%. But that gap is mainly due to investors’ judgments about the two companies diverging growth outlooks. Consumers are more focused on home improvements thanks to pandemic-related changes to shopping and work habits. These shifts have moved against Coke by severely limiting people’s mobility and densely attended events like concerts and sports.

Those limitations won’t last forever (Coke believes a full recovery might take less than two years). Yet it still seems likely that Home Depot will have more resources it can direct toward dividend boosts at least through 2021. The company last reported double-digit gains in both customer traffic and average spending per visit on the way to adding $8 billion of additional revenue to its sales base. Coke, in contrast, saw sales volumes drop 16% in the most recent quarter .

Dividend qualities

Home Depot was a more generous dividend payer even before the pandemic began supporting its finances in early 2020. Its last annual hike was 10%, compared with Coke’s 2.5%. Home Depot also targets returning over 50% of yearly earnings to shareholders as dividends. Rival Lowes (NYSE:LOW), on the other hand, targets a payout ratio of 35%.

That more-aggressive posture does come with extra risks. Home Depot paused payout hikes during the worst of the housing crisis in 2009 and 2010 while Lowe’s continued its modest increases. That’s why the chain doesn’t qualify as a Dividend Aristocrat today, while Coca-Cola easily meets those requirements.

Financial efficiency

Perhaps the best reason to love Home Depot as a dividend stock is its financial efficiency. Under CEO Craig Menear, the company has put together a stellar track record of spending that positioned it well for the current multichannel selling environment while aggressively buying back stock.

The combination of these trends allowed return on invested capital to hover near 40%. That’s well ahead of Coke’s 14% figure and good enough to keep Home Depot near the top of the entire market on that key financial metric.

Of course, these performance gaps aren’t a secret on Wall Street, and that fact helps explain why Home Depot shares have trounced the market in 2020 while Coke’s are lagging. The beverage giant might also attract investors who prefer to purchase excellent businesses that appear to be going through temporary slumps.

Yet Home Depot has earned its premium valuation through a wide

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VIDEO STARS: Spring Garden athletes, cheerleaders ask, don’t you forget about your mask | High School

(The Spring Garden video is at the bottom …)

They love their sports in Spring Garden, and if it means they need to wear masks to slow the spread of COVID-19 and avoid a suspension of their sports year, they’re willing to do it.

And, they’ll have a little fun with it along the way.

Directed by Spring Garden School faculty member Kevin Ward, about a dozen senior athletes and cheerleaders collaborated on a video urging the community to “mask up” so the school can have a full season of athletics. The video was posted on the Spring Garden Network’s Facebook page and has drawn more than 2,400 views. Two different posts of the video on the school’s Twitter account have combined for more than 1,200 views.

“During the summer when we were thinking about ways to get kids to buy into wearing masks, and a video was one of the ideas,” said Ward, a Spring Garden football and basketball coach, an ISS teacher, and an administrator for the school’s social media accounts.

The video lasts one minute, 12 seconds, and it’s a nod to “The Breakfast Club,” a teen movie released in 1985.

The theme song from the movie, “Don’t You (Forget About Me)” by Simple Minds, serves as the background music. The Spring Garden video begins and ends with the students walking toward the camera and leaping in the air, where they’re caught in a freeze frame.

Ward acknowledged he is a “huge” fan of “The Breakfast Club” but that it wasn’t his idea to use that movie as a source of inspiration. Instead, senior football player Luke Welsh mentioned it.

“When we approached the kids about the idea of a video, they were really excited about it, and I wanted to leave it up to them how we would do it,” Ward said. “Luke asked about ‘Breakfast Club’ and having it end with a leap in the air like they did in ’80s videos.”

In the video, the students seemed to enjoy themselves.

“I probably looked goofy,” Welsh said, smiling. “But, we had fun. It’s for the school. Whatever it takes to have a full season.”

Between the leaps at the beginning and end of the video, they promote the message of wearing masks, but they’re enjoying themselves. Senior Weston Kirk is seen wearing a mask covering his whole face, not just his nose and mouth. Welsh is seen laughing about it.

Alexis Adkinson messed up the first time in her attempt to ask folks to wear masks, before nailing it the second time. Both takes are included, with Adkinson smiling the whole way through it.

Spring Garden quarterback Ryley Kirk appears dead serious as he asks for people to wear masks.

“None of them are acting,” Ward said. “They’re just being themselves. What you see from Ryley, that’s how he is.”

There’s even a special appearance by Spring Garden basketball and volleyball coach Ricky Austin.

“I turned the corner and saw them, and Coach Ward said,

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