Updated 3/10/25

The Home Depot (NYSE: HD) has grown into a household name since it was founded in 1978. With over 2,300 stores across North America, it’s the go-to destination for professional contractors and DIYers alike. Whether it’s lumber, tools, or appliances, Home Depot dominates the home improvement space.

For dividend investors, the stock has been a steady performer, consistently returning capital to shareholders. The company not only offers a respectable dividend yield, but it also has a history of strong dividend growth. Let’s break down how HD stacks up as a dividend investment and whether it’s still an attractive choice for long-term income investors.

Key Dividend Metrics

📈 Dividend Yield: 2.44% (Forward)
💰 Annual Dividend: $9.20 per share
📅 Next Dividend Date: March 27, 2025
⚖️ Payout Ratio: 60.36%
🚀 5-Year Dividend Growth Rate: Strong
🏆 Consecutive Years of Dividend Growth: 14+
📊 Free Cash Flow Coverage: Solid

Dividend Overview

Home Depot’s current dividend yield of 2.44% is slightly above the market average. While not a high-yield stock, its strength lies in consistent dividend increases over time.

The company recently boosted its quarterly payout to $2.30 per share, reinforcing its commitment to rewarding shareholders. With a payout ratio of just over 60%, Home Depot is using a healthy portion of its earnings to fund dividends while retaining enough cash for business growth.

For investors seeking reliable income, HD’s dividend is well-supported by strong cash flows. It’s not just about the yield today—it’s about the ability to grow that income over time, and Home Depot has delivered on that front.

Dividend Growth and Safety

A stable dividend is good, but a growing one is even better. Home Depot has built a reputation for consistent dividend increases, making it a solid choice for income-focused investors.

The company has increased its dividend every year since 2010, with a five-year growth rate in the double digits. That’s a clear sign of management’s confidence in future earnings.

One potential concern is its debt level. Home Depot carries significant leverage, with a debt-to-equity ratio above 900%. While this hasn’t impacted dividends yet, it’s something to keep in mind if economic conditions change. However, its strong free cash flow generation provides a cushion that should help maintain payouts even during downturns.

Chart Analysis

Price Action

The stock is currently trading at $376.80, showing some recent weakness after peaking above $425 a few months ago. The price has pulled back and is now sitting just above the 200-day moving average, which could act as a key support level.

There was a noticeable decline from recent highs, with lower highs forming, suggesting that the stock is in a short-term downtrend. The recent candles indicate some hesitation, with both buying and selling pressure at play. The last few sessions have had some longer wicks, hinting at indecision among traders.

Moving Averages

The 50-day moving average has started to curl downward, which is generally a sign of weakening momentum. At the same time, the 200-day moving average remains in an upward trajectory, meaning that from a longer-term perspective, the stock is still in a bullish phase.

With the price now testing the 200-day moving average, this could be a pivotal point. If it holds, a bounce higher may follow. If it breaks below, there could be more downside ahead.

Volume Analysis

Trading volume in recent sessions appears elevated, especially on the down days. That suggests there is some distribution happening, with sellers being more aggressive. However, volume spikes aren’t extreme, meaning there isn’t outright panic selling—just steady profit-taking.

The lack of major volume surges to the upside also signals that buyers haven’t stepped in with conviction just yet. This might indicate that traders are waiting for a clearer direction before committing.

RSI and Momentum

The Relative Strength Index (RSI) is trending in the lower range, showing signs of weakening momentum. It hasn’t yet entered full oversold territory, but it’s getting close. This suggests that the stock might be approaching a short-term bottom, but without clear confirmation, it’s too soon to say if a rebound is imminent.

If RSI continues to decline and breaks below 30, that could signal an oversold condition, potentially leading to a relief bounce. However, if the stock struggles to regain strength, momentum could stay weak for an extended period.

Analyst Ratings

📊 Home Depot has recently been the focus of various analyst evaluations, reflecting both positive and cautious sentiments. The consensus price target among analysts stands at approximately $436.50, indicating a generally optimistic outlook for the company’s stock performance.

🔼 Upgrades

📈 Several analysts have expressed increased confidence in Home Depot’s prospects. HSBC upgraded the stock from a reduce to a hold rating, adjusting their price target from $356 to $410. This shift suggests a more favorable view of the company’s future performance.

💡 Loop Capital maintained a buy rating, though they lowered their price target from $465 to $430, reflecting a tempered yet positive stance. Similarly, Piper Sandler kept an overweight rating on the stock, adjusting their price target from $455 to $435, indicating sustained optimism with slight caution.

🔽 Downgrades

📉 On the other side, some analysts have taken a more conservative approach. RBC Capital reduced their price target from $431 to $424 while maintaining a sector perform rating, suggesting a neutral stance on the stock.

📊 This adjustment reflects a cautious outlook, possibly due to concerns about market conditions, housing trends, or consumer spending shifts affecting Home Depot’s sales.

These mixed analyst opinions highlight the importance of considering various perspectives when evaluating Home Depot’s stock. While the consensus remains moderately positive, individual assessments vary based on differing analyses of the company’s performance and overall market dynamics.

Earnings Report Summary

Home Depot wrapped up its latest quarter with solid numbers, showing resilience despite some challenges in the housing and retail markets. The company reported $39.7 billion in sales for the fourth quarter, which was a 14.1% increase from the previous year. A big part of that jump came from an extra week in the fiscal calendar, which added about $2.5 billion to the top line. When adjusting for that, comparable sales were up 0.8%, with U.S. locations faring slightly better at 1.3% growth.

Profits were also strong, with net earnings hitting $3 billion, or $3.02 per share, compared to $2.8 billion and $2.82 per share a year ago. That extra week of sales added around $0.30 to earnings per share, helping Home Depot maintain steady bottom-line growth.

Looking at the full fiscal year, total sales came in at $159.5 billion, reflecting a 4.5% increase from the prior year. However, comparable sales for the year dipped 1.8%, showing that while overall revenue grew, same-store sales saw some softness. Annual earnings were $14.8 billion, or $14.91 per share, slightly lower than the previous year’s $15.1 billion and $15.11 per share.

Despite some moderation in comparable sales, Home Depot remains committed to rewarding its investors. The board approved a 2.2% increase in the quarterly dividend, bringing it up to $2.30 per share (or $9.20 annually). That marks an impressive 152 consecutive quarters of dividend payments, a testament to the company’s focus on shareholder returns.

Looking ahead, Home Depot expects sales growth of around 2.8% for fiscal 2025, with comparable sales projected to rise by 1.0%. The company plans to open about 13 new stores, keeping expansion steady. Profitability remains a focus, with a gross margin estimate of 33.4% and an operating margin forecast of 13.0%. However, earnings per share are expected to decline by about 3% from the previous year, reflecting cautious expectations for the economy and consumer spending.

CEO Ted Decker emphasized that despite some ongoing headwinds in large-scale remodeling projects, Home Depot saw strong engagement from customers in home improvement spending. He credited the company’s strategic investments and dedicated workforce for delivering solid results in a challenging retail environment.

Overall, the latest earnings report shows Home Depot is still a powerhouse in the home improvement sector, balancing steady sales growth with shareholder-friendly policies. While economic uncertainty remains a factor, the company’s ability to adapt and maintain profitability keeps it in a strong position moving forward.

Financial Health and Stability

A strong dividend relies on a healthy financial foundation. Home Depot’s numbers show a well-run company, but its high debt load does raise some questions.

Revenue over the last twelve months reached $159.51 billion, with net income at $14.81 billion. Its operating margin of 11.32% remains solid, reflecting a well-optimized business model. The company also boasts a return on assets of 15.58%, a sign that it efficiently turns investments into profits.

On the flip side, the company carries $62.29 billion in total debt. While this hasn’t been an issue given its steady cash flow, interest rate fluctuations could make borrowing more expensive in the future. That’s a factor to consider when evaluating the long-term stability of its dividend.

Valuation and Stock Performance

Dividend investors should always consider valuation. Even great companies can become poor investments if bought at the wrong price.

At a price of $374.48 per share, Home Depot isn’t cheap. The forward P/E ratio sits at 25.00, which is higher than the market average. The PEG ratio of 4.34 suggests that growth expectations are already baked into the stock’s price.

Looking at recent price action, the stock has traded between $323.77 and $439.37 over the past year. With its 50-day moving average at $399.88, HD is currently trading below its short-term trend, indicating some recent weakness. That could present a better entry opportunity for long-term investors if the stock pulls back further.

Risks and Considerations

Even the strongest dividend stocks have risks. Here are some key factors that could impact Home Depot’s future:

1. Housing Market Cycles
   Home Depot’s performance is closely tied to housing activity. If interest rates stay high and home improvement spending slows, sales could take a hit.
2. High Debt Levels
   With over $62 billion in debt, Home Depot relies on borrowed capital to fuel growth. While manageable today, higher interest rates could increase financing costs.
3. Competition
   Lowe’s is a direct competitor, and e-commerce players are expanding in the home improvement space. While HD maintains a strong position, competition is always a factor.
4. Consumer Spending Trends
   Economic downturns or shifts in consumer habits could impact demand for big-ticket home improvement projects.
5. Valuation Risk
   Home Depot’s stock isn’t cheap, which could limit future price appreciation. If earnings growth slows, investors could see more modest returns.

Final Thoughts

Home Depot remains a dominant player in the home improvement sector and a strong dividend stock. Its 2.44% yield, consistent dividend growth, and solid cash flow generation make it an appealing choice for long-term income investors.

That said, its high valuation and significant debt load are factors to watch. For those already holding the stock, the dividend remains secure and well-supported. However, investors looking to buy might want to wait for a more attractive entry point, especially given its premium valuation.

With a long track record of rewarding shareholders, Home Depot is likely to remain a solid dividend compounder for years to come.