Home Depot has been consistently increasing dividends for shareholders for over a decade, but the last couple of raises hint at a different story regarding the housing market and free cash flow trends.
Home Depot’s Quarterly Dividend Overview
Back in 2009, during the housing market crisis, Home Depot (NYSE:HD) offered dividends of $0.225 per share each quarter. Fast forward to today, and that figure has grown to $2.33, which is around 10.4 times higher. For those looking for income—particularly retirees—this single number says a lot about Home Depot’s overall functioning beyond just comparable sales figures.
Understanding Dividends Compared to Earnings
Earnings can fluctuate based on factors like lumber prices, tariffs, and acquisition fees. However, dividends represent a cash commitment that the board upholds quarterly, showcasing management’s perspective on what the business can sustain over a complete housing cycle. The announcement in February 2026 noted Home Depot’s 156th consecutive cash dividend.
Growth has driven this increase. Revenue climbed from $66.176 billion at the end of January 2010 to $164.683 billion by fiscal 2025, while net income grew from $2.661 billion to $14.156 billion. The payouts have mirrored profits as well: $0.39 per quarter in 2013, increasing to $1.03 in 2018 and $2.09 in 2023.
Dividend Raises Slow as Housing Activity Lags
However, the pace of increases has markedly decreased. The 2023 raise was 10%, followed by around 7.7% in 2024, then 2.2% in 2025, and just 1.3% in 2026. Much of this slowdown can be attributed to the housing market. Existing home sales stood at only 3.99 million annualized in September, which is considered weak. During the second quarter call, management noted that housing turnover was at its lowest percentage of the housing stock ever, with no immediate signs of improvement. Comparable transactions dipped by 1.0% in that quarter, while the average purchase amount increased by 2.8%.
Stable Coverage, but Less Room for Maneuvering
In fiscal 2025, dividends reached $9.152 billion, while free cash flow was $12.646 billion, resulting in a payout ratio of about 72%. It’s worth noting that free cash flow dropped by 29.53% year-over-year. The projected annual dividend of $9.32 is about 63% of the adjusted EPS for fiscal 2025, estimated at $14.69. The first half of fiscal 2026 appears to be more promising: free cash flow of approximately $9.7 billion covered $4.64 billion in dividends. However, leverage remains a concern, with the net interest expense expected to be around $2.3 billion this year.
Indicators for Future Growth
A positive outlook would emerge from an increase in housing turnover, a recovery of operating cash flow toward the $21.172 billion recorded in fiscal 2023, and a mid-single-digit raise in February. Conversely, a negative scenario would involve yet another minor increase while free cash flow lags behind the dividend obligations. Management anticipates EPS growth to be flat to about 4.0%, which implies that the next raise will likely be modest. At the same time, shares have dropped by 14.56% over the past year, raising the yield to 2.87%.
Conclusion
The magnitude of each annual increase is a reliable indicator of how confident Home Depot’s board is regarding the housing market. Currently, that confidence suggests a patient approach as coverage remains stable. For investors interested in companies with even longer consecutive years of dividend increases, we’ve compiled a list of ten ranked by valuation in a free Dividend Kings report.
