Some investors want to own businesses whose shares have the potential for meaningful capital appreciation over time. Others prefer to own companies that reliably pay sizable dividends. Both types of stocks can fill valuable roles in a diversified portfolio.
Some businesses have both factors working in their favor. For example, one retail stock has produced a total return of 191,500% over the past four decades — and just in the past fiscal year, that company distributed more than $8.9 billion in dividends.
With shares of this niche-leading retailer trading nearly 20% off their peak, is now the time to buy?
An impressive streak
Despite headwinds that have come in the form of economic downturns, a global pandemic, supply chain issues, inflationary pressures, and higher interest rates, nothing has gotten in the way of Home Depot (HD -0.62%) paying a dividend for the past 152 straight quarters — or 38 straight years. That fantastic streak highlights the company’s commitment to its shareholders.
In its fiscal 2024 alone, Home Depot paid over $8.9 billion in dividends, up from $8.4 billion in the previous fiscal year. Its dividend yield of 2.5% at the current share price is almost double the average yield of the S&P 500.
In the past decade, management has boosted those payouts by an impressive 290%. Admittedly, the hikes have been more muted recently. In February of 2023, 2024, and 2025, Home Depot bumped up its quarterly payouts by 10%, 8%, and 2%, respectively. Nonetheless, it’s hard to complain about the long-term track record.
Dominating the industry
Home Depot has been able to increase the amounts it sends to its shareholders because it’s the clear leader in the home improvement segment. The business generated $160 billion in revenue in fiscal 2024, 90% more than chief rival Lowe’s. Home Depot’s scale gives it tremendous advantages in terms of being able to invest in its marketing reach, supply chain, and omnichannel capabilities. This keeps the brand positioned highly in the minds of consumers.
It’s also consistently profitable. Higher interest rates and economic uncertainty have negatively impacted Home Depot in the past couple of years as households have cut back on big-ticket home renovation projects. But the chain still produced $29.9 billion in combined net income in its fiscal 2023 and fiscal 2024. Even amid a softer backdrop for its industry, it continues to generate profits.
Over the long term, favorable tailwinds are working in Home Depot’s favor. The home improvement industry is massive, estimated to be worth $1 trillion, and also fragmented: No. 1 player Home Depot accounts for just 16% of the market. It has plenty of room to steal share from sub-scale operators.
The nation’s aging housing stock also supports durable demand for its wares. The median home in the U.S. was 40 years old in 2022, up drastically from a decade before. There’s no reason to believe this trend won’t continue, and older houses require more upkeep.
High expectations
Same-store sales fell by 1.8% in fiscal 2024, but management expects them to rise by 1% in this fiscal year. Meanwhile, it projects that its operating margin will contract to 13%. Macroeconomic pressures have created a difficult environment for Home Depot.
However, you wouldn’t be able to tell that the company was dealing with growth challenges or margin compression if you looked at its valuation. The stock currently trades at a price-to-earnings ratio of 24. That’s above its historical five- and 10-year averages, indicating that investors believe that Home Depot remains a high-quality business to own in any situation.
Given that high valuation, it’s difficult to imagine the stock will achieve market-beating returns for you if you purchase it today. That might not be a deal-breaker for dividend investors, though, who could do much worse than to buy and hold Home Depot.
Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Home Depot. The Motley Fool recommends Lowe’s Companies. The Motley Fool has a disclosure policy.