Key Takeaways
- Home Depot yields 2.8% and Target yields 2.9%, after Home Depot’s shares rallied more than 25% in a month on hopes for housing-policy relief.
- Target’s dividend is better covered, using 46% of its free cash flow over the trailing 12 months against 61% at Home Depot.
- Both dividends grew fast over the five years to January 2026, but their latest yearly raises were just 2.2% at Home Depot and 1.8% at Target.
- Home Depot’s management still sees pressure on bigger home projects, while Target raised its full-year sales outlook in August.
Home Depot (HD) shares jumped 7% on Nov. 4 after Democrats won back control of the House and Senate, as investors bet on housing-affordability policy and lower Treasury yields. That capped a rally of more than 25% in a month.
After that run, Home Depot yields 2.8%, within a hair of Target (TGT) at 2.9%. With yields that close, an income investor’s choice comes down to dividend growth: which stock pays you more over the next 10 years?
| Metric | Home Depot | Target |
|---|---|---|
| Dividend yield | 2.8% | 2.9% |
| Annual dividend | $9.32 | $4.64 |
| Dividend growth, 5 years (years to Jan. 2021-Jan. 2026) | 8.4% a year | 11.0% a year |
| Dividend record, in the company’s words | 158 consecutive quarterly dividends | More than 50 years of annual increases |
| Cash dividend payout ratio (TTM) | 61% | 46% |
| Net debt/EBITDA | 2.3x | 1.5x |
| Interest coverage | 8.4x | 12.7x |
Source: TIKR, Nov. 9, 2026; dividend records from each company.
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Home Depot is still waiting on housing
Home Depot’s business is growing, but slowly. In the second quarter of its fiscal 2026, which ended Aug. 2, sales rose 5.7% to $47.9 billion. Comparable sales rose only 1.7%, and customer transactions fell 1.0%. The Pro business, smaller projects and online sales (up 11%) are carrying the business, while bigger discretionary projects remain under pressure. CEO Edward Decker was blunt about it on the company’s May call: “we’re not looking at a marked improvement in underlying demand.” Management expects adjusted EPS to grow between flat and 4% this fiscal year.
Over the twelve months to Aug. 2, the dividend used 61% of free cash flow. That’s well covered, but the cushion has been shrinking, as this chart shows. Dividends kept climbing while free cash flow fell from its $18.0 billion peak in the year ended January 2024:
In the year ended January 2026, the dividend took 72.4% of free cash flow, up from 39.4% five years earlier.
Target is drawing more shoppers
Target’s dividend grew faster than Home Depot’s over the past five years, and its stores are now drawing more traffic. In its second quarter, which ended Aug. 1, comparable sales rose 3.8% on a 3.6% rise in traffic, and net sales grew 5.3% to $26.5 billion. Management raised its full-year sales outlook to growth of around 5%. Food, beauty and advertising are growing, while home and apparel are flattish, and management expects that turnaround to run into 2027.
Over the twelve months to Aug. 1, Target’s dividend used 46% of free cash flow. This chart shows that Target’s free cash flow has swung far more than Home Depot’s, and it went negative in the year ended January 2023:
In the year ended January 2026, the dividend took 72.4% of free cash flow, the same share as at Home Depot. On its second-quarter call, management said it looks to “support the dividend and build on our more than 50-year record of annual increases.” It also pointed to “our goal of moving towards a 40% payout ratio over time.” That points to raises that trail profit growth for a while, and the latest one was 1.8%.
So which dividend wins?
Target pays you more over the next 10 years. At each company’s five-year growth rate, $10,000 in Target pays about $4,838 in dividends over the decade, against about $4,132 for Home Depot.
But neither dividend is growing that fast now. At each one’s latest raise, Target’s lead over the decade shrinks to about $48: $3,146 against $3,097. Home Depot’s income would only pass Target’s around 2035, too late to close the gap. So the real test is which company can raise faster from here. I’d take Target: it has more free cash flow left over after the dividend, less debt and growing traffic.
Home Depot’s dividend still has plenty going for it. It grew 14.1% a year, from $2.46 a share in the year ended January 2016 to $9.20 in the year ended January 2026. And a housing recovery would give management good reason to speed raises up again. It’s just that Target pays the bigger check today, with more room behind it.
Of course, if Home Depot’s raises get back to their 8.4% five-year pace while Target’s stay near 2%, Home Depot comes out ahead ($4,132 against $3,146).
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
