Home Depot Dividend Safe Despite Weak Housing Market

Home Depot's dividend appears safe for now despite weak housing market conditions. The company's free cash flow of $12.65 billion covers its $9.15 billion in annual payouts, although raises have shrunk to just 1.3%. This trend is expected to continue as the housing turnover rate remains stuck at record lows.

Richard McPhail, Home Depot's executive vice president and chief financial officer, warned that housing turnover has been low for four years with no sign of an inflection point in sight. This affects not only Home Depot but also Lowe's and Sherwin-Williams, which depend on homeowners committing to large renovation projects.

However, the company's pro customers are helping offset weak DIY demand. Pro customers have posted positive comps and outperformed DIY, with second-quarter comp sales rising 1.7% despite a decline in transactions of 1.0%. The number of pros has also increased, with SRS now above 1,340 locations.