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Driven by Strong Home Demand, D.R. Horton Increases Dividend by 14%

D.R. Horton (DHI) is the largest homebuilder in the United States by volume.

The Texas-based company operates across 29 states via four brands – D.R. Horton, Express Homes, Emerald Homes and Freedom Homes. The majority of its homes are sold under the D.R. Horton brand, followed by Express Homes.

DHI has a presence across all the major home segments, including entry-level, move-up, active adult and luxury. In terms of geographic spread in the United States, it is pretty balanced with DHI drawing 30% of homebuilding revenue from the Southeast, 25% from South Central, 20% from the West, 13% from the East, 7% from the Midwest and the remaining from the Southwest.

Besides constructing high-quality homes, the company provides complimentary services including mortgage financing, title services and insurance services for homebuyers.

Diversified Portfolio Helps Improve Cash Flows and Reward Shareholders

DHI’s strategy has been to consolidate its market share, while improving operating cash flows. The company also intends to grow its inventory of land and homes. In addition, its focus on maintaining a strong balance sheet, adequate liquidity and low leverage gave it enough flexibility to operate through challenging economic environments like we have seen in 2020.

As a result, for the fiscal year ended September 2020, DHI was able to improve its homebuilding revenue by nearly 15% and diluted earnings per share by nearly 50% when compared to 2019.

This enabled the company to increase its quarterly dividend by 14% from 17.5 cents to 20 cents payable to shareholders of record as of December 4, 2020. This marks the sixth consecutive years of dividend increase. On top of that, the company plans on resuming its share repurchase program next year.

In terms of near-term outlook, DHI seems well positioned to capitalize on increased demand as its Q4 2020 inventory of nearly 38,000 units is significantly more compared to the same quarter in the previous years. At the same time, DHI alo significantly increased the number of lots it controlled as of Q4 2020.

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