We recently published a list of Dividend Stock Portfolio For Income: Top 10 Stocks to Buy. In this article, we are going to take a look at where The Home Depot, Inc. (NYSE:HD) stands against other stocks to buy from dividend stock portfolio for income.
There is a common misconception that dividend stocks are primarily suited for those nearing retirement. However, this is not the case. Both experienced and retail investors have long favored dividend stocks, as they provide a steady stream of income. Unlike growth companies, dividend-paying firms distribute a portion of their profits to shareholders. While dividend investing may seem simple, successfully implementing this strategy requires thorough research and careful analysis.
Financial advisor Michael Dinich discussed dividend investing in an interview with Business Insider. Here are some comments from the analyst:
“While low-cost index funds provide easily diversified exposure to the market with minimal effort, selecting individual dividend payers demands continued research to find suitable candidates.”
He further highlighted that dividend stocks serve as a reliable income source, which can either be reinvested to compound returns or used as cash for various financial needs. This makes them particularly valuable for younger investors, offering both market exposure and a consistent income stream. His insights align with the broader impact of dividend income on market returns over extended periods. According to a report by S&P Dow Jones Indices, from 1926 to July 2023, dividends contributed 32% of the monthly total return of the broader market, with the remainder driven by capital appreciation.
READ ALSO: Top 10 Dividend Stocks To Buy According To Hedge Funds
A study by WisdomTree emphasized the strong income potential of dividend-paying stocks. The report suggested that focusing on dividends can significantly boost investors’ dividend earnings and improve the trailing 12-month dividend yield. This approach is especially beneficial during periods of low yields and market uncertainty. Investing in dividend-weighted indexes may provide a reliable strategy for generating income in such challenging conditions.
For the past two years, dividend stocks have underperformed the broader market, largely due to increased investments in the AI sector. However, analysts remain optimistic about dividend growth, particularly as more technology companies introduce dividend policies to attract investors. According to a report by S&P Global, total US dividends are expected to rise by 7% in 2025, reaching $784 billion. In recent years, and continuing into the current fiscal year, key contributions to dividend growth have come from sectors such as energy, pharmaceuticals, financial services, banking, and REITs. The report also highlighted that the media and entertainment sector experienced a significant surge in total dividend payouts in 2024, climbing by 140%, largely driven by the dividend policies of two major companies. This upward trend is expected to continue in 2025, with the sector projected to see an 18.6% increase in dividend growth, leading the market once again.
While regular dividends are projected to increase, variable dividends are set to decline by approximately 50%, with estimates placing the total for 2025 at $13.5 billion. Across all US sectors, variable dividends are expected to shrink, as persistent inflation and higher interest rates have limited the additional cash flow available for distribution.
Our Methodology
For this list, we first used a stock screener to pick companies that have raised their dividends for at least 10 consecutive years or more. From that list, we narrowed down our options to companies with dividend yields of around 2%, as of February 25, demonstrating robust financial standings and consistent cash flow, which are indicative of their ability to sustain reliable dividends for passive income. From these companies we picked 10 stocks with the highest number of hedge fund investors, using Insider Monkey’s database of over 1,000 hedge funds and their holdings as of Q4 2024
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 373.4% since May 2014, beating its benchmark by 218 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: 88
The Home Depot, Inc. (NYSE:HD) is an American home improvement company, headquartered in Georgia. The company is engaged in the sale of building materials and home improvement products. It recently announced solid earnings for the fourth quarter of 2024, with revenues amounting to $39.7 billion, up over 14% from the same period last year. For fiscal year 2025, the company expects total sales growth of around 2.8%, with comparable sales expected to rise by approximately 1% over the comparable 52-week period. It also plans to expand its footprint by opening about 13 new stores. In addition, the company projects a gross margin of roughly 33.4%.
The Home Depot, Inc. (NYSE:HD) ended the quarter with over $1.65 billion available in cash and cash equivalents. For FY24, the company generated nearly $20 billion in operating cash flow. This cash position has allowed the company to pay regular dividends for 152 quarters straight. It also announced a 2.2% hike in its quarterly dividend to $2.30 per share, which was the company’s 15th consecutive year of dividend growth. As of February 25, the stock has a dividend yield of 2.29%.
At the end of Q4 2024, 88 hedge funds tracked by Insider Monkey held stakes in The Home Depot, Inc. (NYSE:HD), up from 82 in the previous quarter. These stakes are collectively valued at over $7.7 billion. Among these hedge funds, Fisher Asset Management was the company’s leading stakeholder in Q4.
Overall, HD ranks 2nd on our list of stocks to buy from dividend stock portfolio for income. 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.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap
Disclosure: None. This article is originally published at Insider Monkey.
