David Auld became the CEO of D.R. Horton, Inc. (NYSE:DHI) in 2014, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for D.R. Horton.
How Does Total Compensation For David Auld Compare With Other Companies In The Industry?
Our data indicates that D.R. Horton, Inc. has a market capitalization of US$26b, and total annual CEO compensation was reported as US$14m for the year to September 2019. We note that's a small decrease of 3.4% on last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$700k.
For comparison, other companies in the industry with market capitalizations above US$8.0b, reported a median total CEO compensation of US$14m. From this we gather that David Auld is paid around the median for CEOs in the industry. What's more, David Auld holds US$22m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
On an industry level, roughly 27% of total compensation represents salary and 73% is other remuneration. Interestingly, the company has chosen to go down an unconventional route in that it pays a smaller salary to David Auld as compared to non-salary compensation over the one-year period examined. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.
D.R. Horton, Inc.'s Growth
D.R. Horton, Inc. has seen its earnings per share (EPS) increase by 27% a year over the past three years. Its revenue is up 11% over the last year.
This demonstrates that the company has been improving recently and is good news for the shareholders. It's also good to see decent revenue growth in the last year, suggesting the business is healthy and growing. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.
Has D.R. Horton, Inc. Been A Good Investment?
We think that the total shareholder return of 108%, over three years, would leave most D.R. Horton, Inc. shareholders smiling. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.
D.R. Horton prefers rewarding its CEO through non-salary benefits. As we touched on above, D.R. Horton, Inc. is currently paying a compensation that's close to the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. Few would be critical of the leadership, since returns have been juicy and EPS are moving in the right direction. So one could argue that CEO compensation is quite modest, if you consider company performance! In fact, shareholders might even think the CEO deserves a raise as a reward due to the fantastic returns generated.
While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We've identified 2 warning signs for D.R. Horton that investors should be aware of in a dynamic business environment.
Important note: D.R. Horton is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.
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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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