There are no safe havens in the stock market. Every stock carries risk. But some less than others. This column features stocks that have shown one or more of the following characteristics: less volatility, better earnings, larger market caps, safe and increasing dividends. In these times of turmoil, our goal is to show readers better opportunities for investing with fewer risks.

October 5, 2009 - Home Depot (HD-NYSE) together with its subsidiaries, operates as a home improvement retailer company. The company's Home Depot stores sell building materials, home improvement supplies, and lawn and garden products to do-it-yourself customers, do-it-for-me (D-I-F-M) customers, home improvement contractors, tradespeople, and building maintenance professionals.

As of February 1, 2009, it operated 2,233 retail stores in the United States, including the Commonwealth of Puerto Rico, and the territories of the U.S. Virgin Islands and Guam; Canada; China; and Mexico. The Home Depot, Inc. was founded in 1978 and is based in Atlanta, Georgia.

Fiscal second quarter earnings were a nice surprise (fiscal year ends January 30). Analysts' consensus estimate was for 59 cents. The company delivered 64 cents or an 8.5% upside surprise. For the fiscal first quarter, the surprise was even better: 20.7% ahead of consensus estimate (35 cents actual vs. 29 cents projected). Even with the upside in the second quarter, 64 cents was 10% below the 71 cents in the same period last year. Total revenues were down 9% for the quarter compared to the second quarter of 2008. In the U.S., comparable store sales were down 6.5%.

Lower revenues are part of any economic recession. Consumers fret about their jobs, a weak housing market, and general economic distress. They don't buy big ticket items like appliances or do major remodels. But they do keep maintaining their homes and doing outdoor projects, both of which have driven better than expected sales at Home Depot. Still, analysts see sales lower by 8.5% in 2010 ($65.24 billion) compared to 2009 ($71.29 billion), then rising 1.5% to $66.19 billion in 2011.

Knowing this, management has been pro-active on cost cutting, delivering better customer service, and improving supply-chain management as well as information technology. Combined, these efforts are holding profit margins steady and helping gain market share.

The main driver for HD is the housing market, and there does seem to be a dim light on the horizon for the industry. In fact, foot traffic at the HD stores has been improving, quarter to quarter sequentially. While big ticket sales will most likely stay soft, if investors feel the housing market has hit bottom, they should be positive on HD's potential. Both the housing market and the economy should have decent recoveries over the next several years unless something totally unpredicted creates new hardships.

For conservative investors, there's comfort in the balance sheet. While debt is 34% of capital, there's $3.113 billion in cash in the vaults. Current ratio is 1.32. Total debt is $11.43 billion. Long term interest payments are covered 9.7 times with total interest coverage at 8.6 times. $5.090 billion is due within 5 years. There's an annual dividend of 90 cents a share this year, the same as last year. In 2005, it was 40 cents, then went to 68 cents in 2006, followed by 90 cents. Ex-dividend date will be about December 1 and the dividend date will be about December 16.

More numbers: P/E is 18.9 while the Forward P/E is 15.72. Price to sales is .66. Price to Book is $2.31. Book value is $11.25. Operating margin for the last 12 months was 6.45% with a Profit margin of 3.45%. Return on equity was 12.61%. Total cash per share is $1.85. There are 1.70 billion shares outstanding. Institutions own 71.3% of the 1.62 billion share float.

Conservative investors who are even mildly bullish on the economy and the housing market should find this stock worth more time. While the stock has rallied strongly since its low of $17.50 in March of this year, it's still well below its high of $70 set in 2000.

- Company Web site: www.homedepot.com

- Ted Allrich