Home Depot (HD) has been a powerhouse in the home improvement retail sector for years. The company saw remarkable growth during the COVID-19 pandemic when millions of Americans invested in home renovations. But looking beyond the pandemic, how has Home Depot performed as a long-term investment?
A decade of growth: The numbers
Ten years ago, Home Depot’s stock closed at $79.40 per share. Today, it’s trading at around $331.97, marking a staggering 318% increase over the last decade.
If an investor had put $1,000 into Home Depot stock 10 years ago, they would have purchased approximately 12.6 shares. At today’s price, that investment would be worth about $4,181, not including dividends.
Dividend payments add even more Value
Beyond price appreciation, Home Depot has consistently paid dividends, making it an attractive option for income-focused investors. The stock’s dividend yield currently sits at around 2.71%, and over the last decade, it has typically ranged between 2% and 2.5%.
For long-term investors, these dividends would have further increased the total return on investment. Reinvesting those dividends over time could have led to even higher gains, thanks to the power of compounding.
How home depot compares to the S&P 500
While Home Depot has surged, how does it compare to the broader market? The S&P 500, represented by the SPDR S&P 500 ETF Trust (SPY), has grown from $188.06 to $500.35 over the last decade—a 166.06% increase.
While the S&P 500 also paid dividends, its average yield of 1.5% to 2.2% was lower than Home Depot’s. Investors who chose Home Depot over an index fund tracking the S&P 500 saw significantly greater returns.
What’s next for home depot stock?
Past performance is impressive, but what does the future hold for Home Depot? Analysts remain optimistic about its prospects.
Analysts’ consensus: A buy rating
A survey of 25 Wall Street analysts gives Home Depot a consensus “Buy” rating. Their average 12-month price target is $376.60, which represents a potential 13.4% upside from current levels.
Housing market trends favor home depot
Several macroeconomic factors suggest Home Depot is well-positioned for continued growth:
1. Housing shortage: The U.S. still faces a housing shortage, leading many buyers to opt for older homes that require frequent maintenance and upgrades.
2. Mortgage rate lock-in effect: Many homeowners are staying put due to historically low mortgage rates. Instead of selling, they are choosing to renovate their current homes—boosting demand for Home Depot’s products.
3. Strong brand and market position: Home Depot dominates the home improvement retail sector alongside Lowe’s, giving it a competitive advantage.
Should you invest in Home Depot now?
If you had invested $1,000 in Home Depot stock 10 years ago, you would have seen impressive gains. Looking ahead, analysts remain bullish, and broader market trends suggest continued growth for the company.
While no stock is without risk, Home Depot’s strong market position, steady dividend payouts, and favorable housing trends make it a compelling long-term investment.
