Home Depot's Dividend Faces Pressure as Housing Market Remains Frozen

Home Depot's stock price has dropped to near its 52-week low of $284.85, and the company's dividend yield has increased to 3.13%. The question on investors' minds is whether the $9.32 annual payout can continue if housing turnover remains stuck at record lows.

Housing turnover has been frozen for four years, with existing home sales falling to a 3.98 million annualized pace in August. Richard McPhail, a Home Depot executive, stated that there is 'just no sign of an inflection point' in the housing market. This decline affects not only Home Depot but also Lowe's and Sherwin-Williams, as all three companies rely on homeowner willingness to commit to projects.

However, pro customers are keeping the company afloat by posting positive comps, even as transactions fall. Free cash flow remains strong, covering the dividend payment of $2.32 billion in the first two quarters. But debt is a concern, with net debt/EBITDA standing at 2.65 and interest coverage at 8.66.

The company has maintained its quarterly payout for 156 consecutive quarters, but raises have been modest, with only a 1.3% increase this year. This follows the strategy during the last housing crash, where management froze the dividend rather than cutting it. CEO Ted Decker stated that demand is 'relatively similar to what we saw throughout fiscal 2025,' despite greater consumer uncertainty and housing affordability pressure.