It's a sad fact that a shareholder friendly company is hard to come by these days. Fortunately, one company that not only continues to deliver financial rewards also happens to almost always act in the best interests of its owners. That company? National home improvement retailer Home Depot (NYSE:HD) . Not only is Home Depot extremely shareholder friendly, but it also appears to be even more so than arch-rival Lowe's (NYSE:LOW) which also happens to be among the best of breed when it comes to putting itself in its owners shoes. 

Recent shareholder rewards
In the first quarter, Home Depot and Lowe's were both generous with their excess capital via share buybacks and dividends. Home Depot was more generous with share buybacks and dividends in the first quarter, but one quarter is too small of a sample to get a real clear idea of which company is more likely to offer more generous shareholder returns in the future. And since Home Depot is a larger company, we should also look at growth as opposed to just specific numbers. 

First take a look at share-buyback growth for these two companies over the past five years:

LOW Stock Buyback (Annual) Chart

Lowe's Stock Buyback (Annual) data by YCharts

Now take a look at annual dividend yields for both companies over the past five years:

HD Dividend Yield (TTM) Chart

Home Depot Dividend Yield (trailing-12 months) data by YCharts

Once again, it's clear that Home Depot is the hands-down winner. That said, in regard to dividend yield, both companies offer a higher yield than the S&P Retail average of 1.15%.

That's the recent past, but we need more proof that Home Depot will continue to reward its shareholders in the future.

Future expectations
According to Home Depot's presentation at the 2014 European Investor Meetings, it has the long-term goal of increasing its dividend every year while using excess liquidity to buy back shares.

In order to accomplish this goal, Home Depot will need to generate strong free cash flow. While the past doesn't guarantee future results, it's a pretty good indicator. With that in mind, take a gander at Home Depot's consistent free cash flow generation over the past five years:

HD Free Cash Flow (Annual) Chart

Home Depot Free Cash Flow (Annual) data by YCharts

Home Depot also expects the following results for fiscal-year 2014:

  • Sales growth of 4.8%
  • Comps growth of 4.6%
  • Operating margin expansion of 70 basis points to 12%
  • Diluted earnings-per-share growth of 17.6% to $4.42 (includes share buybacks)
  • Return on invested capital of 24%

If you have the time, pick five public retailers and look at their 10-Q or 10-K filings or the most recent quarterly press releases. Once you find that retailer's guidance for the fiscal year, compare it to Home Depot's.

Most people who run this test will fail to find a retailer as optimistic about its future as Home Depot. This has a lot to do with Home Depot not needing to rely on excessive promotions to drive traffic and sales to its stores. When other retailers run these promotions, it contracts margins, which then negatively impacts the bottom line. The current stability of the housing market (subject to change) has also helped.

The bottom line
Home Depot is sensitive to fluctuations in the housing market. However, there will always be homes in the United States, and as long as that's the case, homeowners will need to spend money on repairs and upgrades. For most people, their first stop will be Home Depot. This fact alone makes Home Depot an appealing long-term investment. When you add generous shareholder returns, it makes Home Depot even more appealing as well as best of breed.