We recently compiled a list of the 8 Best American Dividend Stocks To Buy Right Now. In this article, we are going to take a look at where The Home Depot, Inc. (NYSE:HD) stands against the other American dividend stocks.
The US economy expanded by 2.8% in the third quarter of 2024, as reported in the Advance GDP release from the U.S. Bureau of Economic Analysis. This marked the ninth straight quarter of growth in real GDP. While the third-quarter increase was robust, it slightly lagged behind the 3% growth recorded in the second quarter of 2024. Economists polled by Dow Jones had anticipated a 3.1% rise.
Regardless of market conditions, investors frequently seek to minimize risk in their portfolios, and investing in dividend stocks is a reliable approach to achieve this. A report by S&P Dow Jones Indices highlighted the growing significance of dividends as a source of personal income. Over time, dividend income has steadily risen, increasing from 2.68% in the fourth quarter of 1980 to 7.88% in the second quarter of 2024. In contrast, interest income has seen a decline, dropping from 14.58% to 7.61% during the same period.
Also read: 8 Best Dividend Kings To Invest In For Safe Dividend Growth
The Dividend Aristocrat Index, which tracks the performance of companies with 25 consecutive years of dividend growth, has surged by over 10% since the start of 2024, underperforming the market. Although dividend stocks may not have been hitting it out of the park this year, US companies have remained dedicated to rewarding shareholders by consistently paying dividends. According to a report by S&P Dow Jones, for the 12-month period ending in September 2024, US common dividend increases totaled $74.7 billion, marking a 16.9% rise from the $63.9 billion recorded in the same period a year earlier, ending in September 2023. The report also mentioned that in the third quarter of 2024, there were 480 dividend increases reported, marking a 7.1% rise compared to the 448 increases in the same period in 2023. The total value of these dividend hikes amounted to $14.1 billion for the quarter.
WisdomTree offers an interesting perspective on global dividends in its report. According to their findings, the global equity market currently distributes around $1.6 trillion in dividends, an increase from approximately $1.5 trillion last year. Notably, 55% of these dividends come from outside the US, which is about 15% more than the non-US share in market cap-weighted indexes. On the other hand, US companies account for 44% of global dividends, which is considerably less than their 63% share of global market capitalization. This suggests that non-US markets are more heavily weighted in dividend-focused indexes, while US exposure is relatively lower. For instance, European countries make up about a quarter of global dividend payments, which is 10% more than their share of the global market cap.
That said, the start of dividend payments by several major US tech companies contributed an additional 1.1 percentage points to the global growth rate in Q2, as reported by Janus Henderson’s Global Dividend Index report. The report also mentioned that the contribution from these new dividend payers will persist throughout the remainder of the year, ensuring that US payout growth remains ahead of the global average. In view of this, let’s take a look at some of the best American dividend stocks.
Our Methodology:
We created this list by scanning Insider Monkey’s Q3 2024 database for US companies that have consistently increased their dividends for at least 10 years and are traded on American stock exchanges. Then, we chose stocks with dividend yields above 2% as of December 10. Finally, we selected the top 8 companies with the most hedge fund investors in Q3 2024 from the refined dataset.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A home improvement store overflowing with a variety of products and supplies.
The Home Depot, Inc. (NYSE:HD)
Number of Hedge Fund Holders: 82
The Home Depot, Inc. (NYSE:HD) is an American multinational home improvement retail company that sells appliances, tools, construction equipment, and related products. The company faced challenges this year due to increasing macroeconomic uncertainty, which dampened overall consumer demand and led to reduced spending on home improvement projects. In its latest quarter, it reported a 1.3% decline in same-store sales compared to the previous year—an unfavorable outcome for any retail-focused business. Management anticipates this downward trend will persist for the remainder of the fiscal year. That said, the stock has surged by over 22.4% since the start of 2024.
This was also highlighted by Carillon Tower Advisers in its Q3 2024 investor letter. Here is what the firm has to say:
“While Home Depot, Inc.’s (NYSE:HD) recent reported earnings were somewhat tepid, the market seems to be pricing in an inversion of the company’s sales, driven by lower interest rates. Home Depot reported its seventh consecutive quarter of same-store sales declines, giving back substantial gains that it enjoyed during the pandemic. High mortgage rates have also put a damper on existing home sales. People typically spend the most on home repairs and improvements in years when they buy or sell houses, often conducting both transactions in the same year.”
In the third quarter of 2024, The Home Depot, Inc. (NYSE:HD) reported revenue of $40.22 billion, which showed a 6.6% growth from the same period last year. The company’s operating income came in at $5.4 billion and its operating margin was 13.5%. It experienced improved customer interest in seasonal products and various outdoor projects, along with additional sales driven by demand related to hurricane activity.
In the first nine months of the year, The Home Depot, Inc. (NYSE:HD) generated over $15 billion in operating cash flow. The company’s strong cash position makes it a generous dividend payer. The company currently pays a quarterly dividend of $2.25 per share and has a dividend yield of 2.13%, as of December 10. It is one of the best dividend stocks on our list as the company has raised its payouts for 14 consecutive years.
According to Insider Monkey’s database of Q3 2024, 82 hedge funds owned stakes in The Home Depot, Inc. (NYSE:HD), down from 86 in the preceding quarter. These stakes are worth nearly $7.6 billion in total. Ken Fisher’s Fisher Asset Management owned the largest stake in the company.
Overall HD ranks 3rd on our list of the best American dividend stocks to buy right now. While we acknowledge the potential for HD as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than HD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
