Great companies like BP PLC (NYSE: BP), Caterpillar (NYSE: CAT), and others will fall due to a scandal or temporary situation that brings negative news that takes down the stock price. It is now happening with Home Depot (NYSE: HD), due to a security breach. As with BP PLC, Caterpillar and others, buyers should expect Home Depot to recover and be a rewarding long term buy.
Home Depot is down for the last week of market action due to the computer data breach (chart below).
This is an opportunity for long term investors to buy at a discount. For income investors, Home Depot is especially alluring. Home Depot is a Dividend Aristocrat. That means it has increased the dividend amount annually for at least the past 25 years. At present, the dividend yield for Home Depot is 2.11 percent. That is more than ten percent higher than the average for a member of the Standard & Poor’s 500 Index (NYSE: SPY).
Before the recent negative news, Home Depot was up for the last month, quarter, six months, and year of market action.
For 2014, Home Depot has risen nearly 10 percent. The earnings outlook is very bullish. Five years earnings are expected by Wall Street to top the amount for next year.
That is what investors are looking for in a stock!
As with Caterpillar and BP PLC, Home Depot has much, much more of what is appealing to long term investors, too. Two bullish signs are the high level of institutional ownership and the low short float. The high level of institutional ownership reveals that Big Money investors such as mutual funds, pension groups, and others bullish on Home Depot. The low short float shows that few on Wall Street are willing to bet that Home Depot will fall in price.
That is a powerful combination that should have investors buying Home Depot on the dips to book a rewarding long term return!