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The Home Depot, Inc. (HD) vs. Hewlett-Packard Company (HPQ): Which Dow Stock’s Dividend Dominates?

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Dividend stocks outperform non-dividend-paying stocks over the long run. It happens in good markets and bad, and the benefit of dividends can be quite striking: Dividend payments have made up about 40% of the market’s average annual return from 1936 to the present day. But few of us can invest in every single dividend-paying stock on the market, and even if we could, we might find better gains by being selective. That’s why we’ll be pitting two of the Dow Jones Industrial Average‘s dividend payers against each other today to find out which Dow stock is the true dividend champion. Let’s take a closer look at our two contenders now.

The Home Depot, Inc. (NYSE:HD)Tale of the tape
The Home Depot, Inc. (NYSE:HD) joined the Dow in 1999 as the lone old-economy stock in a tech-heavy reshuffling, and in the aftermath of the dot-com crash it became the best-performing new addition of the four. Operating out of the suburbs of Atlanta, The Home Depot, Inc. (NYSE:HD) is one of the Dow’s youngest components, as it was founded in 1978. Since then, it has grown to become the largest home-improvement retailer in the world (and the fourth-largest retailer in the U.S., period) with more than 2,200 stores located throughout the U.S., Canada, and Mexico — and a few in China as well. It’s often seen as a bellwether for the American housing industry, as so many homebuilders, homebuyers, and specialized contractors shop at The Home Depot, Inc. (NYSE:HD).

Hewlett-Packard Company (NYSE:HPQ) joined the Dow two years earlier than The Home Depot, Inc. (NYSE:HD), in 1997, but its roots are the roots of Silicon Valley itself and can be traced all the way back to 1939. Hewlett-Packard Company (NYSE:HPQ), too, is known for its “hardware,” but this computer maker is a bellwether of a different sort: Hewlett-Packard Company (NYSE:HPQ)’s diverse operations give it claim to the title of “world’s largest technology company.” Until very recently, it was the world’s largest PC-manufacturer. It’s still the global leader in consumer printers, and it also maintains a major presence in servers, software, and business services.

Statistic Home Depot Hewlett-Packard (NYSE:HPQ)
Market cap $118.1 billion $49.1 billion
P/E ratio 26.5 N/A
TTM profit margin 6.1% (10.9%)
TTM free-cash-flow margin* 7.8% 7.1%
Five-year total return 234.7% (42.3%)

Source: Morningstar and YCharts. N/A = not applicable due to negative earnings. TTM = trailing-12-month.
*Free cash flow margin is free cash flow divided by revenue for the trailing 12 months.

This may not be much of a contest. Hewlett-Packard Company (NYSE:HPQ) has been down in the dumps lately, and although its turnaround is proceeding faster than expected, the company still finds itself looking up at The Home Depot, Inc. (NYSE:HD) on every metric. But are there any hidden advantages Hewlett-Packard Company (NYSE:HPQ) brings to the dividend game? Let’s find out.

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