Home Depot (HD) — which has risen 18% so far in 2021 — was founded more than 40 years ago back in 1978. Since that time it has grown into the leading home improvement retailer in the U.S. based on its market cap of $328 billion, notes Ben Reynolds, editor of Sure Passive Income.

Home Depot’s impressive growth history is evidence of a durable competitive advantage. The companies rival Lowe’s (LOW) has a market cap of $134 billion for comparison.

The company has size and scale in its industry. It can pressure suppliers for the best prices and give customers reasonable price. Only competitor Lowe’s is of a somewhat similar size — although Home Depot is now around 1.5 time the size of Lowes based on revenue.

Recessions have not been a major concern for Home Depot, including the COVID-19 related economic downturn. People spending more time at home has led to greater sales for the home retailer, as more attention is paid to home projects that need completion.

The strength of Home Depot and its dominant position within the home improvement retail industry are partially why we recommended Home Depot for 2021.

We also liked the company’s strong expected growth ahead — we projected 9% annualized growth. And the stock’s 2.2% dividend yield at the time and reasonable payout ratio meant a bit above market average yields coupled with a high likelihood of continued dividend increases.

Home Depot has seen more positive news since our recommendation at the beginning of 2021.  Home Depot realized revenue growth of 25.1% and earnings-per-share growth of 16.2% year-over-year in its Q4 2020 earnings release on February 23rd.

Q1 2021 results, which were released on May 18th, came in strong as well. Revenue and earnings-per-share increased 32.7% and 85.6%, respectively, year-over-year. And then two days later, Home Depot announced a new $20 billion share repurchase authorization, which is 6.1% of the company’s market cap at current prices.

Home Depot continues to build its business and shareholder wealth. On the positive side, we continue to appreciate the company’s growth prospects, and expect 9% annualized growth ahead. This may well prove to be too conservative. And, the company’s stock has a 2.1% dividend yield, which is higher than the S&P 500’s dividend yield of 1.4%.

On the downside, we view Home Depot as a bit overvalued at current prices. Our fair value estimate for the stock is $288. As a result, we view Home Depot as a quality long-term hold today. It would be a compelling buy for us if it were to fall below our fair value estimate.

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