Smart Dividend Portfolio: Solid Foundation
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Dear Investor,
Welcome to our weekly edition of TipRanks’ Smart Dividend Portfolio & Newsletter.
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Market-Moving News: June 22, 2026
Stocks ended the week higher as investors leaned back into risk assets, with technology leading the move. The Dow Jones Industrial Average (DJIA) rose 0.14% to 51,564.70, while the S&P 500 (SPX) gained 1.08% to 7,500.58. The Nasdaq (NDX) climbed 2.48% to 30,406.19, helped by a stronger appetite for growth stocks.
The 10-year U.S. government bond yield stood at 4.455%, down 0.008 percentage points. Oil (CM:CL) rose 1.23% to $77.54, while gold (CM:XAUUSD) fell 1.72% to $4,172.90. Bitcoin (BTC-USD) gained 0.46% to $64,139.86, showing modest strength as crypto trailed the broader tech-led rally.
Optimism around reopening Hormuz flows, paired with a drop in oil prices to a four-month low, drove a strong rally led by technology and cyclicals. Just days after the historic IPO of Elon Musk’s space and AI company, SpaceX (SPCX), the company announced the acquisition of Anysphere, the startup behind the popular AI coding platform Cursor. The deal gives xAI – Musk’s artificial intelligence business, which recently merged with SpaceX – a strong application layer while aligning with SpaceX’s broader vertical integration strategy.
On the policy front, the Federal Reserve held interest rates steady under newly appointed Chair Kevin Warsh, while signaling that further increases could come later this year if inflation remains sticky. That hawkishness stems from energy-inflation risk, which is precisely why markets greeted the preliminary Iran deal with such exuberance. Though the U.S. isn’t captive to flows through the Strait, oil prices are set globally, and domestic benchmarks follow. With crude elevated for months, the pressure is already seeping through the economy, lifting producer and consumer price indexes. The Fed, working mostly from backward-looking data, still sees the inflation scare in the rearview mirror – and is therefore keeping its foot on the brakes.
The week ahead will likely keep investors focused on earnings from consumer, logistics, semiconductor, software, and industrial names. The calendar is not packed, but several large-cap reports could give the market useful reads on spending trends, AI infrastructure demand, freight activity, travel, and restaurant traffic.
Rates will also stay in focus after the 10-year U.S. government bond yield ended the week at 4.455%. Growth stocks led the market last week, but that leadership still depends partly on whether yields stay contained. A renewed rise in bond yields could pressure expensive technology names, while stable rates would give investors more room to keep rewarding companies tied to AI, cloud, chips, and digital demand.
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This Week’s Quality Dividend Stock Idea
Home Depot (HD) is the world’s largest home improvement retailer, providing a wide range of building materials, home improvement products, lawn and garden supplies, and related services. The company serves homeowners, professional contractors, tradespeople, and businesses through an extensive network of retail stores, e-commerce platforms, and supply chain operations across North America.
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Beyond Blueprints
Home Depot’s history began in 1978 when founders Bernard Marcus and Arthur Blank launched a new retail concept built around large-format warehouse stores offering a vast assortment of home improvement products at competitive prices. The company opened its first stores in Atlanta in 1979 and quickly differentiated itself from traditional hardware retailers through scale, product selection, and knowledgeable customer service. This warehouse model proved highly successful, enabling rapid expansion across the United States throughout the 1980s and establishing Home Depot as a leading destination for both do-it-yourself homeowners and professional contractors.
Growth accelerated during the 1990s as the company expanded nationally, entered new metropolitan markets, and invested heavily in distribution and supply chain infrastructure. The combination of new store openings, increasing customer traffic, and strong merchandising execution drove consistent sales and earnings growth. At the same time, Home Depot broadened its appeal to professional contractors, creating a larger and more resilient customer base.
During the 2000s and 2010s, management shifted its focus from pure store expansion toward operational efficiency, supply chain modernization, and digital transformation. The company invested heavily in interconnected retail capabilities that integrated stores, distribution centers, e-commerce platforms, and fulfillment networks. These initiatives improved inventory availability, enhanced customer convenience, and supported continued market share gains.
Acquisitions also became an increasingly important component of Home Depot’s growth strategy, particularly as management sought to deepen relationships with professional customers. An early step occurred in 2015 with the acquisition of Interline Brands, which provided a direct distribution platform for maintenance, repair, and operations (MRO) products serving facilities managers, property owners, and hospitality businesses. In 2017, Home Depot acquired The Company Store, expanding its online presence in home textiles and strengthening its e-commerce capabilities.
The company’s strategic focus on professional customers became even more pronounced in the 2020s. In 2020, Home Depot re-acquired HD Supply for roughly $8 billion to $9 billion, bringing back a business it had originally spun off in 2007. The acquisition significantly strengthened its MRO operations serving multifamily housing, hospitality, healthcare, and institutional customers. Home Depot continued expanding its specialty offerings through the acquisition of International Designs Group (IDG) in 2023, a distributor of stone and porcelain tile products. In 2024, the company completed its largest acquisition ever, purchasing SRS Distribution for approximately $18 billion. The deal established a leading position in roofing, landscaping, and pool supplies while significantly expanding Home Depot’s reach among specialty trade contractors. That strategy continued in 2025 when SRS acquired GMS, a leading distributor of drywall, ceilings, steel framing, and related construction products, further broadening Home Depot’s professional construction distribution network.
Notably, these acquisitions marked a significant evolution in strategy. The reacquisition of HD Supply, followed by the additions of SRS and GMS, reflects a deliberate effort to transform Home Depot from primarily a home improvement retailer into a comprehensive supplier serving professional tradespeople across multiple construction categories.
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Nailing It
Home Depot generates revenue by selling a broad assortment of home improvement, building, maintenance, repair, and construction products to both do-it-yourself homeowners and professional contractors. Its business spans thousands of product categories, including building materials, tools, hardware, plumbing, electrical supplies, paint, flooring, appliances, garden products, and home décor. The company also generates revenue from installation services, tool rentals, and other project-related solutions that deepen customer engagement and increase spending per project.
A key strength of Home Depot’s business model is its balanced exposure to both consumer and professional customers. While homeowners drive demand for repair, maintenance, and renovation projects, professional contractors typically make larger and more frequent purchases. Over the past decade, management has increasingly focused on expanding its professional business, recognizing that contractors represent a larger share of industry spending and tend to be less transactional than retail customers. This strategy has been reinforced through investments in delivery capabilities, dedicated sales support, and acquisitions such as HD Supply, SRS Distribution, and GMS, which broaden the company’s reach across the specialty construction and maintenance markets.
Scale is another major competitive advantage. Home Depot operates the largest home improvement retail network in North America, supported by an extensive distribution and fulfillment infrastructure. Its interconnected retail model integrates physical stores, distribution centers, websites, and mobile applications, allowing customers to shop seamlessly across channels. Online sales continue to grow while stores remain critical fulfillment hubs, improving convenience and strengthening customer loyalty.
The company’s earnings power is supported by several structural advantages. Its large purchasing scale enables favorable supplier relationships and strong merchandising economics, while investments in supply chain efficiency help improve inventory management and operating productivity. In addition, Home Depot benefits from recurring demand tied to repair and maintenance activity, which tends to be more resilient than discretionary renovation spending.
Looking ahead, continued market share gains, growing penetration of professional customers, expansion of specialty distribution businesses, and ongoing digital and supply chain investments provide multiple avenues for revenue growth and margin improvement. Combined with the company’s asset-efficient operating model and strong cash generation, these factors position Home Depot to continue producing substantial earnings and free cash flow over the long term.
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Solid Footing
Several themes emerged from Home Depot’s quarter that are particularly important for investors evaluating the company’s long-term growth outlook.
First, underlying demand remains stable, even if a broad housing-market recovery has yet to materialize. Comparable sales grew modestly, supported by continued spending on repair, maintenance, and smaller home improvement projects. Nine of Home Depot’s 16 merchandising departments posted positive comparable sales growth, including power tools, hardware, plumbing, electrical, paint, kitchen, and bath products. This suggests that homeowners continue to invest in their properties despite economic uncertainty and elevated interest rates.
Consumer spending patterns reinforce this view. Average ticket size increased 2.2% during the quarter, while transaction counts declined 1.3%. In practical terms, fewer customers were shopping, but those who did visit spent more per trip. This indicates that homeowners are becoming more selective rather than abandoning home improvement spending altogether. Similarly, transactions exceeding $1,000 increased 0.8% year-over-year, remaining positive despite affordability pressures. While large discretionary renovation projects remain under pressure, customers continue to spend on projects they view as necessary or high value.
Home Depot’s digital business also remains a bright spot. Online sales grew more than 10% year-over-year, marking the fourth consecutive quarter of double-digit growth. The performance suggests that the company’s long-term investments in its interconnected retail model – integrating stores, digital channels, and fulfillment capabilities – are helping drive customer engagement and market-share gains.
Management’s overall outlook remains measured but constructive. The company does not expect a significant housing-market recovery this year and continues to face headwinds from elevated mortgage rates, weak housing turnover, and affordability constraints. However, management emphasized that its core customer remains financially healthy, supported by substantial home equity gains and continued wage growth. The challenge is not a lack of spending power but rather continued project deferrals caused by higher financing costs and economic uncertainty. Against that backdrop, Home Depot remains focused on gaining market share, expanding its professional business, and leveraging its acquisitions to drive future revenue and earnings growth.
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Going Pro
Perhaps the most important development is the continued strength of the professional customer (“Pro”) business. These include general contractors, roofers, landscapers, remodelers, electricians, plumbers, Heating, Ventilation, and Air Conditioning (HVAC) technicians, and other tradespeople who purchase materials and supplies as part of their daily work.
Management noted that Pro sales once again outperformed DIY customers, with the strongest growth coming from larger and more complex purchase occasions. These projects typically involve higher-value orders, multiple product categories, delivery coordination, financing solutions, and ongoing customer relationships. The trend suggests that Home Depot’s investments in dedicated field sales teams, delivery capabilities, and contractor-focused services are beginning to gain traction with larger professional customers.
This opportunity is significant because Home Depot now estimates its professional addressable market at more than $1.2 trillion, up from roughly $700 billion previously, following acquisitions such as SRS Distribution and expansion into HVAC distribution. Management believes the company is uniquely positioned to capture market share through its combination of more than 2,360 stores, extensive distribution infrastructure, specialized contractor-focused businesses, and a growing professional sales organization.
The company’s recent entry into HVAC distribution further expands this opportunity. Through the acquisition of Mingledorff’s earlier this year, a wholesale distributor of HVAC equipment, parts and supplies, Home Depot has gained a foothold in a large and fragmented market supported by recurring repair and replacement demand. Unlike new construction activity, HVAC repairs and equipment replacement tend to be less cyclical, providing a potentially more resilient source of revenue growth. Management also sees an opportunity to leverage Home Depot’s existing store network, distribution assets, and digital capabilities to build a broader national HVAC parts distribution platform over time.
Recent acquisitions are beginning to create additional growth opportunities beyond their standalone revenue contributions. Management estimates that cross-selling across Home Depot, SRS Distribution, GMS, HD Supply, and Construction Resources is currently generating approximately $400 million of annualized revenue and expects that figure to roughly double by fiscal 2027. While still early, this demonstrates that the acquired businesses are beginning to work together and create new customer relationships across multiple construction categories.
Home Depot’s trade credit program is gaining momentum with homebuilders and large remodeling contractors, particularly in long-lead-time categories like windows, doors, and appliances. The program’s key differentiator is its payment structure: contractors receive 30-day terms beginning at shipment rather than at order placement, meaningfully reducing the period their cash is tied up in inventory. This allows professionals to preserve liquidity for payroll, equipment, and additional projects — in some cases influencing purchasing decisions as much as product pricing does. Management is now integrating trade credit into Home Depot’s digital platform through an online pilot, shifting the program beyond traditional sales-rep-driven adoption toward scalable self-service access. The planned Q2 expansion signals that management views trade credit not merely as a financing tool, but as a strategic lever for attracting and retaining high-value professional customers.
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Built Patient
Over the past five years, Home Depot’s revenue has grown at a 2.4% CAGR, supported by a pandemic-era home improvement boom, strategic acquisitions, pricing actions, and continued growth in digital sales. While EPS declined at 1.2% over the same period, the pressure largely reflects investments in expanding the company’s professional contractor platform through acquisitions such as HD Supply, SRS Distribution, and GMS, along with higher financing and integration costs.
First-quarter results reflected both the benefits and costs of this strategy. Revenue increased 4.8% year-over-year to $41.8 billion, exceeding consensus estimates, while comparable sales rose 0.6% company-wide and 0.4% in the U.S. Comparable sales trends improved from 0.7% growth in February to 2% growth in March before declining 0.5% in April, with management attributing the weakness primarily to unfavorable weather comparisons. Gross margin declined 75 basis points to 33%, largely due to the lower-margin GMS business and pricing investments within SRS’s roofing operations. As a result, adjusted operating margin fell to 12.3% from 13.2%, while adjusted diluted EPS declined 3.7% to $3.43, though it still exceeded Street expectations. The quarter also included $171 million of intangible asset amortization expense.
Despite near-term profitability pressure, Home Depot’s cash generation remained strong. Free cash flow increased 47% year-over-year to $5.18 billion, while capital expenditures totaled $844 million, or approximately 2% of sales, below the company’s full-year target of roughly 2.5%. Merchandise inventories ended the quarter at $27.3 billion, up about $1.5 billion year-over-year, while inventory turns declined slightly to 4.2x from 4.3x. The company’s adjusted debt-to-EBITDAR ratio remained manageable at 2.4x, supported by investment-grade credit ratings of “A2” from Moody’s and “A” from both S&P Global and Fitch.
The impact of Home Depot’s acquisition strategy is also evident in its returns. Return on invested capital declined to 25.4% from 31.3% a year earlier as the company integrated the more capital-intensive SRS Distribution and GMS acquisitions, but it remains well above retail industry averages. While the acquisitions have temporarily diluted profitability metrics, they significantly expand the company’s reach in the professional contractor market and create opportunities for stronger revenue and earnings growth as integration benefits are realized. Home Depot’s return on assets and return on equity also rank among the top 10% and top 3% of the industry, respectively.
Despite ongoing uncertainty surrounding interest rates, energy prices, and trade policy, management reaffirmed its fiscal 2026 outlook. The company continues to expect comparable sales growth ranging from flat to 2%, total sales growth of 2.5% to 4.5%, adjusted operating margin of 12.8% to 13%, and adjusted EPS growth of flat to 4%. Management cited first-quarter results that were largely in line with expectations, stable trends entering the second quarter, and confidence in Home Depot’s ability to gain market share even in a slower demand environment.
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Yielding Results
Home Depot has paid dividends continuously since 1987 and increased them for 15 consecutive years. Over the past decade, its dividend has grown at a CAGR of approximately 11%. The company currently distributes about 64% of adjusted earnings and offers a 2.67% dividend yield, more than double the consumer cyclical sector average of 1.05%.
The company also retains substantial capacity for future share repurchases. In August 2023, the board approved a new $15 billion buyback authorization with no expiration date, replacing a similarly sized program. However, management suspended repurchases in March 2024 and had not resumed them as of the end of the first quarter, leaving approximately $11.7 billion available for future buybacks.
Home Depot’s shares have declined by more than 6% over the past year as a sluggish housing market and weaker demand for large remodeling projects weighed on sentiment. Nevertheless, the business has remained resilient, supported by healthy repair and maintenance spending and several quarters of positive U.S. comparable sales growth.
Relative to peers such as Lowe’s, Costco, and Builders FirstSource, Home Depot trades within a moderate valuation range across non-GAAP trailing and forward P/E, forward EV/EBITDA, and forward price-to-cash-flow metrics. That valuation appears justified by the company’s superior business quality, including roughly $18 billion in annual operating cash flow, industry-leading profitability metrics, strong free cash flow generation, and consistently high returns on capital. Its scale, market leadership, and large professional contractor customer base also contribute to durable and predictable cash flows.
With Home Depot operating through one of the weakest housing markets in decades, a normalization in housing activity could unlock significant earnings growth, making today’s valuation look considerably more attractive in hindsight.
Analysts remain bullish because the company’s strong cash generation supports capital investments, dividends, and strategic growth initiatives while providing resilience during economic downturns. Growth in its online business and professional contractor segment, combined with its extensive store network, expanding distribution capabilities, and job-site service offerings, further strengthens its competitive position and supports long-term market-share gains.
Reflecting these strengths, Wall Street’s consensus implies approximately 16% upside from current share levels, while more bullish estimates suggest potential gains of up to 31%. Discounted cash flow models point to even greater value, indicating that Home Depot shares may be trading at an approximately 26% discount to their estimated intrinsic value.
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Investing Takeaway
For income-focused investors, Home Depot remains one of the more compelling dividend opportunities in the retail sector. The company combines a long history of uninterrupted dividend payments with a proven commitment to annual dividend growth, supported by strong cash generation and a resilient business model. Even during a challenging housing environment, Home Depot continues to benefit from recurring repair and maintenance demand, helping sustain cash flows and shareholder distributions.
What makes the dividend particularly attractive is that it is backed by industry-leading scale, strong profitability, and a growing presence in the professional contractor market, which could support future earnings growth once housing activity normalizes. While recent acquisitions and investments have temporarily pressured margins, they also expand the company’s long-term growth runway. For investors seeking a blend of current income, dividend growth potential, and business quality, Home Depot remains a strong candidate for a long-term dividend portfolio.
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Dividend Investor Portfolio
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Portfolio News
▣ Honeywell (HON) received final board approval for the spin-off of its aerospace business, clearing the way for the separation to be completed on June 29. The transaction will create two independent companies: Honeywell Aerospace, focused on commercial aviation, defense, and space markets, and Honeywell Technologies, which will concentrate on automation, industrial software, and related technologies. Following the separation, Honeywell Technologies will continue trading under the ticker HON.
Under the terms of the deal, shareholders of record as of June 15 will receive one share of Honeywell Aerospace for every two Honeywell shares they owned. The spin-off represents one of the largest industrial breakups in recent years and reflects management’s effort to simplify the company’s portfolio and sharpen its strategic focus. CEO Vimal Kapur described the approval as another step in Honeywell’s ongoing transformation, which has included a series of acquisitions and divestitures aimed at creating a more focused and growth-oriented business structure.
▣ Kroger (KR) Kroger delivered a solid start to fiscal 2026, demonstrating resilience despite a cautious consumer environment. Total sales were $46.1 billion, up by 2.2% year-over-year, primarily reflecting the impact of store divestitures and beating Street estimates. However, underlying demand remained healthy, with identical sales excluding fuel increasing 1%, driven by strength in pharmacy, fresh products, and private-label offerings.
Profitability also improved during the quarter. Gross margin contracted to 22.7% from 23% a year earlier, benefiting from growth in higher-margin businesses such as pharmacy and advertising. Operating profit increased to $1.4 billion from $1.3 billion in the prior-year period, while adjusted FIFO operating profit rose 2% to $1.54 billion. Adjusted EPS increased 6% year-over-year to $1.58.
Management reaffirmed its FY26 guidance and expects its full-year identical sales guidance, excluding fuel in the range of 1%-2%, while maintaining adjusted EPS guidance of $5.2 at the midpoint. The results highlight Kroger’s ability to drive market-share gains through its digital ecosystem, private-label portfolio, pharmacy business, and customer loyalty initiatives despite ongoing inflationary and competitive pressures.
▣ Philip Morris’s (PM) ex-dividend date is June 25, with the dividend payable on July 20.
▣ Qualcomm (QCOM) is reportedly in discussions to acquire AI chip startup Tenstorrent in a deal valued between $8 billion and $10 billion, according to The Information. While negotiations remain ongoing and no agreement has been finalized, the potential acquisition would significantly strengthen Qualcomm’s artificial intelligence and data-center ambitions. The proposed valuation represents a substantial premium to Tenstorrent’s last known valuation of approximately $3.2 billion, when the company was reportedly seeking to raise $800 million in funding.
Founded in 2016 by renowned chip designer Jim Keller, Tenstorrent develops specialized AI processors that it claims can run certain AI workloads more efficiently than traditional GPUs. If completed, the transaction would follow Qualcomm’s recent $2.4 billion acquisition of Alphawave Semi and reflect the broader race among major technology companies to secure AI chip capabilities.
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Recent Trades
None at the moment, although we are considering adding a stock to our portfolio when the market conditions allow for an attractive entry point. Stay tuned.
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Portfolio Attributes
| Dividend Portfolio Yield |
Expected Dividend Growth | Expected Annual Income |
| 3.93% | +4.99% | $6,164.34 |
| Yield-on-Cost Adjusted, Weighted |
Average Analyst 12-Month Growth Outlook | 10K Per Stock at the Time of Purchase |
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Current Portfolio
| Name | EX-Dividend Date | Payment Date | Yield on Cost | Annual DPS |
| Automatic Data Processing (ADP) | Jun 15, 2026 | Jul 01, 2026 | 2.46% | $6.80 |
| Amgen (AMGN) | Aug 20, 2026 | Sep 10, 2026 | 3.27% | $10.08 |
| BlackRock (BLK) | Sep 03, 2026 | Sep 24, 2026 | 2.61% | $22.92 |
| Bank of Nova Scotia (BNS) | Jul 02, 2026 | Jul 29, 2026 | 5.98% | $3.21 |
| EOG Resources (EOG) | Jul 16, 2026 | Jul 30, 2026 | 3.06% | $4.08 |
| ExxonMobil (XOM) | Aug 13, 2026 | Sep 10, 2026 | 3.64% | $4.12 |
| Honeywell International (HON) | Aug 13, 2026 | Sep 03, 2026 | 2.39% | $4.76 |
| IBM (IBM) | Aug 06, 2026 | Sep 10, 2026 | 3.16% | $6.76 |
| JPMorgan Chase (JPM) | Jul 03, 2026 | Jul 31, 2026 | 3.43% | $6.00 |
| Kroger (KR) | Aug 13, 2026 | Sep 03, 2026 | 3.08% | $1.40 |
| Cisco Systems (CSCO) | Jul 02, 2026 | Jul 23, 2026 | 2.22% | $1.68 |
| PepsiCo (PEP) | Sep 03, 2026 | Sep 24, 2026 | 3.8% | $5.69 |
| Philip Morris (PM) | Jun 25, 2026 | Jul 20, 2026 | 6.06% | $5.88 |
| Qualcomm (QCOM) | Sep 03, 2026 | Sep 24, 2026 | 2.44% | $3.68 |
| VICI Properties (VICI) | Jun 18, 2026 | Jul 10, 2026 | 5.22% | $1.8 |
| Verizon (VZ) | Jul 09, 2026 | Aug 03, 2026 | 6.09% | $2.76 |
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Disclaimer
The information contained in this article represents the views and opinions of the writer only, and not the views or opinions of TipRanks or its affiliates and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy, or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment, and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices, or performance.
