The Home Depot, Inc. (HD), Lumber Liquidators Holdings Inc (LL): Growth and Income Investors Should Feel Right at Home

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If you’re an investor looking for a stock that can offer you both growth and income, one name you should immediately add to your Watchlist is The Home Depot, Inc. (NYSE:HD). To say that Home Depot has regained its former glory would be an understatement as just a few years ago many wondered if the company was still a growth story. In the last several quarters not only has Home Depot proved that it can still grow at a good pace, but the company’s commitment to dividend increases has driven the stock price as well. With a better than 2% yield and more than 14% expected earnings growth, this might be one of the better growth and income stocks available today.

The Home Depot, Inc. (NYSE:HD)

Housing Is Helping but Management Should Get Most of the Credit

There’s no question that The Home Depot, Inc. (NYSE:HD) benefits as the housing market improves. As the largest purveyor of home improvement and contracting supplies, Home Depot is where homeowners begin their projects as new homes are built and sold or existing homes are upgraded.

What’s ironic is, even though Lowe’s Companies, Inc. (NYSE:LOW) operates over 1,700 stores compared to roughly 2,200 Home Depot locations, Lowe’s is clearly underperforming its larger rival. In the current quarter, overall sales at Home Depot increased by 7.4%, compared to a 0.5% decrease at Lowe’s. You would expect a better housing market to benefit both companies, but clearly customers are thinking of Home Depot first.

In addition, The Home Depot, Inc. (NYSE:HD)’s performance is particularly strong considering the increased competition from both general retailers like Wal-Mart Stores, Inc. (NYSE:WMT), and smaller specialty stores like Lumber Liquidators Holdings Inc (NYSE:LL). Wal-Mart seems to always be looking for a way to expand its business and in the last several years has expanded its home improvement selection. Lumber Liquidators Holdings Inc (NYSE:LL) is more of a specialty store that sells all types of flooring, but the company has been growing earnings and sales at a tremendous pace. With Wal-Mart squeezing prices on the low end and Lumber Liquidators offering a smaller and possibly more convenient environment, it’s surprising that Home Depot has done as well as it has.

Four Things That Make Home Depot Different From Peers

It’s one thing when companies give lip service to offering great customer service and reasonable prices, but it’s something else when a company actually delivers on these promises. Clearly, The Home Depot, Inc. (NYSE:HD) knows what its customers want as the company has consistently reported strong same-store sales growth. In fact, the only company to report faster growth in same-store sales is the much smaller Lumber Liquidators.

In the current quarter, Lumber Liquidators led the group with a same-store sales increase of 15.2%. By comparison, Home Depot reported same-store sales increased by 4.3%, whereas both Lowe’s and Wal-Mart showed a same-store sales decline. If investors want a great reason to consider sticking with, or buying, Home Depot’s shares, it has to be the company’s consistent same-store sales growth, even in difficult environments.

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