S&P 500 The index is continuously going up. It has risen 9% year to date (as of May 22), offset by inflationary pressures and widespread macroeconomic uncertainty. Tech stocks keep outperforming benchmarks.
But investors may be thinking now is the time to look for opportunities in names that have not performed well recently. There are high quality businesses out there that provide a steady income source, but the market is not fully appreciating them today. This S&P 500 dividend stock Could be a great example.
Will AI create the world’s first trillionaire? Our team recently released a report on a little-known company, dubbed an “essential monopoly,” that provides critical technology needed by both Nvidia and Intel.
During the three-month period ending May 3, which is the first quarter of its fiscal year 2026, home depot(NYSE:HD) Beat Wall Street expectations. It reported revenues of $41.8 billion, representing a year-on-year increase of 4.8% from the first quarter of 2025.
Net income fell 4.2% as operating expenses rose faster than the top line.
Despite beating analysts’ estimates, Home Depot is struggling with an unfavorable macroeconomic environment. Its same-store sales rose just 0.6%, compared to management’s expectations of a 1% jump (at the midpoint) for the full fiscal year. Worse, comparable transactions have declined for the fourth consecutive quarter, indicating soft traffic.
There are notable changes keeping Home Depot down. Mortgage rates are historically high, housing turnover is low, and consumer confidence is extremely weak. This discourages people from tackling expensive renovation projects.
Management’s foot is on the gas pedal
External economic forces have not gotten in the way of the leadership team’s focus. The Home Depot is strengthening its position in the professional sector of the overall home improvement market.
In 2024, the company purchased building products wholesaler SRS Distribution for more than $18.2 billion. The Home Depot recently acquired Mingledorf, a distributor of heating, ventilation and air conditioning equipment. And last year, Home Depot bought GMS, another specialty products distributor, for $5.5 billion. These steps provide better exposure to the business’ estimated $1.2 trillion addressable opportunity.
Professional customers are an extremely important demographic. Contractors, roofers, electricians and plumbers handle many complex jobs, so they spend more and visit shops more frequently.
The long-term industry outlook still looks promising. For starters, there is a tremendous amount of home equity that can be taken advantage of in the future. This can unlock a lot of untapped financial power of consumers.
The aging housing stock is another factor to take into account. The average age of a household in this country is 44 years. This figure increased by 10% in the last five years. It’s no surprise that older homes require more maintenance and upkeep.
Home Depot is the largest player in the market. But the industry is vast and fragmented. With its strong supply chain, wide inventory assortment, omnichannel capabilities and brand recognition, the company is favorably positioned to steadily capture market share.
Investors can generate income while waiting for the correction
At the time of this writing on May 22, Home Depot shares were trading 28% below their high. This high-water mark was set in December 2024. The market is disappointed with how macro trends are negatively impacting business.
But income investors may be pleased with the current dividend yield of 2.98%. That’s nearly three times the S&P 500 index’s 1.05% yield. And it highlights the company’s focus on shareholder capital returns.
Home Depot has paid dividends for 157 consecutive quarters. It is continuously funded by profits. The company’s quarterly operating margin averaged 14.1% over the past decade. And in fiscal years 2026, 2027 and 2028, analysts believe it will generate $49 billion in total free cash flow.
With the stock well above its record, investors may find the dividend yield attractive as they wait for fundamentals to improve.
Should you buy stock in Home Depot right now?
Consider this before buying stock at Home Depot:
Motley Fool Stock Advisor The analyst team has just identified what they believe 10 best stocks For investors to buy now… and Home Depot wasn’t one of them. The 10 stocks that made the cut could deliver tremendous returns in the coming years.
consider when Netflix This list was created on December 17, 2004… If you invested $1,000 at the time of our recommendation, You will have $477,813!* or when NVIDIA This list was created on April 15, 2005… If you invested $1,000 at the time of our recommendation, You will have $1,320,088!*
Now, it’s worth noting stock advisor The total average return is 986% – Market-crushing outperformance compared to 208% for the S&P 500. Don’t miss the latest top 10 list available with stock advisorAnd join an investment community built by individual investors for individual investors.
Neil Patel No positions in any of the stocks mentioned. The Motley Fool has posts on Home Depot and recommends it. The Motley Fool has one Disclosure Policy.
