Home Depot is the No. 1 home improvement retailer.
The company has few opportunities to add locations in its current markets.
The massive dividend growth over its history makes the stock a solid hold.
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Home Depot (NYSE: HD) has one of the most successful stocks in history. The stock launched its initial public offering (IPO) in 1981, just two years after its founding. Today, it operates over 2,300 stores in the U.S., Canada, and Mexico.
However, after expansion outside of North America failed, it has opened fewer than one new location per month. With its current markets close to saturation, it’s worth predicting where Home Depot stock will be over the next five years.
Home Depot is the No. 1 home improvement retailer. The average location serves do-it-yourselfers working on projects around the home, stocking around 35,000 products.
Since Home Depot was far larger than the average hardware store, it made itself a one-stop shop for home improvement, changing the way Americans shopped for such items. Of its peers, only Lowe’s, the other major home improvement retailer in the U.S., comes close to fully competing, though chains like Floor & Decor or Tractor Supply compete in specific areas.
Nonetheless, Home Depot’s most concerning threat may be its success. Approximately 90% of the U.S. population lives within 10 miles of one of its locations. Amid its failed expansion efforts outside of North America, Home Depot appears to have few options for outsized growth.
Unless it can find a way to succeed in new markets, that dynamic is unlikely to change. Thus, it will probably come as little surprise that Home Depot has underperformed the S&P 500 over the previous five years, even when accounting for dividends.
Like the state of the enterprise, the financials reflect a mature business. In the first half of 2025, revenue of $85 billion grew 7% compared to the same period in 2024.
Unfortunately, both its costs of sales and operating expenses rose faster than revenue during that time frame. Consequently, operating income grew by only 0.6% for the period. Also, falling interest income and rising interest expenses helped take its net income for the first two quarters of 2025 to $8 billion, a 2.2% reduction versus year-ago levels.
Additionally, third-quarter projections call for sales growth of 2.8%. Still, even if Home Depot beats that estimate, a sequential growth slowdown appears likely.
Instead, dividends have arguably become the best reason to own Home Depot stock. Its first dividend was in 1987, and it amounted to a split-adjusted annual payout of approximately one-sixth of one cent per share. Since that time, numerous increases have taken its current payout to $9.20 per share yearly. That amounts to a dividend yield of 2.25%, well above the 1.2% average for the S&P 500.
