Home Depot has been a top stock for dividend growth.
If you’re looking for a dividend stock to buy, Home Depot (HD 0.47%) is a great place to start. The home improvement retailer is one of the best-performing stocks of all time and continues to deliver strong results, thanks to a compelling set of competitive advantages.
The company essentially has a duopoly in its industry with rival Lowe’s, so both companies have scale advantages over competitors. Home Depot has also invested in tech and omnichannel resources, allowing it to better serve customers and manage inventory.
Currently, the company pays a dividend yield of 2.2%. It has raised its dividend every year since 2019, generally by 10% or more.
Image source: Home Depot.
How to make $1,000 in dividends from Home Depot
The company offers a 2.2% dividend yield, so you’d need to own $45,454 worth of its stock to make $1,000 a year in dividend income. At Home Depot’s current share price of $414, that means buying 110 shares.
Home Depot’s dividend yield is significantly better than the S&P 500’s, which has fallen to 1.2% as the index has become dominated by high-flying tech stocks that pay little or no dividends. There are many higher-yielding stocks out there, but the home improvement retailer offers a good combination of growth and yield, which is hard to find.
Is Home Depot a buy?
Home Depot stock has soared in recent months, rallying on expectations that interest rates will fall and a housing recovery is around the corner. The retailer’s business has been sluggish of late due to the housing slowdown following the pandemic-era boom, but there are signs a recovery could be afoot as applications for home equity lines of credit are increasing and falling mortgage rates will effectively make buying a home less expensive.
The stock might look expensive at a price-to-earnings ratio of 28, but there’s a lot of slack in the housing market. Once Home Depot returns to growth, the stock should move even higher and the dividend increases could get stronger.
Jeremy Bowman has 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.