How to buy Home Depot stock (HD)—6 steps to invest
For DIYers, Home Depot is heaven on earth. This massive retailer has become the ultimate starting place for home improvement projects thanks to its vast array of tools, hardware and building materials. Given Home Depot's scale and brand recognition, it has also become one of the hottest retail stocks on Wall Street. Since its debut on the market in 1978, Home Depot has become a solid performer and earned a spot in the illustrious S&P 500 and Dow Jones Industrial Average.
Whenever people think about getting exposure to the home improvement market, they understandably get curious about how to buy Home Depot stock. Although Home Depot has plenty of potential pros, weigh these positives against potential risks before taking a stock position.
How to buy Home Depot stock
Nowadays, it's as easy to find Home Depot's stock on brokerages as it is to find a nearby location in North America. If a trading platform offers US-listed stocks, chances are there will be no issues adding Home Depot shares to an account.
- 1.
Sign up for a reputable brokerage: If you don't already have a stock brokerage account, you'll need to find a trading site that offers access to US equities such as Home Depot. While building a shortlist of brokerages, compare other features like their reputation in the industry, third-party reviews and average fees to pick the right fit.
- 2.
Fund your brokerage account: Before you buy Home Depot shares, you'll need to transfer money into your brokerage account through a bank deposit, a fintech solution such as PayPal, or a debit or credit card. ACH transfers from banks are often the cheapest way to send money, and many brokerages use third-party services like Plaid for security.
- 3.
Search for Home Depot's stock: The ticker for Home Depot's stock is "HD," so search for these two letters on your brokerage site. After hitting "enter," you should see Home Depot's price on a live chart and the option to buy or sell shares.
- 4.
Decide how many HD shares to buy: Every broker has different rules on the minimum number of shares you can purchase. Sometimes, you'll need to buy at least one share of HD, while other platforms let you buy fractions of a share.
- 5.
Choose a market or limit order: For extra customizability, you're free to use a market or limit order to buy your HD shares. Market buy orders execute immediately at the current share price, while limit orders let you set a predefined price per HD share before they take effect.
- 6.
Review fees and confirm the transaction: More brokers are jumping on the "commission-free" bandwagon, but there may still be fees associated with your buy order. Be sure to check the total purchase price before finalizing your transaction.
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About Home Depot, Inc.
The entrepreneurs Bernie Marcus and Arthur Blank first outlined their idea of a "one-stop shop" focused on home improvement in the late 1970s. These initial sketches eventually led to the opening of the first Home Depot retail locations in Atlanta, Georgia, in 1978. From the start, customers were impressed with Home Depot's unprecedented size and selection, encouraging the brand to ramp up its expansion efforts. Today, there are 2,3001 Home Depots throughout the USA, Canada and Mexico. In addition to expanding its brick-and-mortar presence, Home Depot continues to develop its eCommerce portal and make strategic investments, including the 2015 acquisition of Interline Brands2.
Is Home Depot a good stock to buy?
With its massive scale and consistent revenue growth, Home Depot is often considered a relatively safe "blue-chip" investment. Recent estimates suggest HD stock's 10-year compound annual growth rate (CAGR) has been 15.9%3, which is slightly higher than the S&P 500's historical performance of about 10%4 growth per year. Besides steady growth, Home Depot rewards investors with quarterly dividends and often approves share buybacks5 to take some of the supply out of the market.
Although Home Depot's past performance has been positive over the long-term, it's more attractive for investors who prefer sacrificing higher gains for greater security and passive income.
Pros and cons of buying Home Depot stock
Pros
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Market leader: Many investors get into Home Depot's stock due to its status as the DIY king. With 2,300 stores, Home Depot has massive brand recognition and a competitive advantage over others in the home improvement space.
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Generous dividends and buybacks: Home Depot currently has a $9.00 annual dividend per share6, giving shareholders some decent passive income throughout the year. On top of dividends, Home Depot frequently authorizes buybacks to remove the risk of share dilution.
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Solid financials: Home Depot's revenue7 and operating income continue to rise over the long term. Although Home Depot has debt8 on its balance sheet, it's still in a healthy financial position to handle this over the ensuing years.
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Loyal customer base: Another reason behind Home Depot's success is its high standards for customer care. Home Depot's customers often rank as some of the most loyal9, and incentives like the Pro Xtra Loyalty Program10 help attract and retain professional clients.
Cons
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Competition: Despite Home Depot's dominant position in the DIY market, plenty of challengers could steal market share. From brick-and-mortar competitors such as Lowe's to eCommerce sites like Amazon, Home Depot faces many threats on its home turf.
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Supply chain challenges: Home Depot is susceptible to global shipping delays and rising raw material costs, which might lead to shortages or increased operational costs. Any disruptions in supply chains hinder the company's ability to meet demands and satisfy its customers.
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Economic sensitivity: Since Home Depot is in the business of home improvement, any downturn in the housing market is bad news. Also, if consumers tighten budgets due to economic issues, they might forego spending on non-essential DIY projects.
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Focused on the North American market: Although Home Depot has expanded throughout North America, it's still heavily reliant on the US and Canadian economies. While this narrow focus is good news during good times, it also means it's vulnerable to economic issues specific to this region.
FAQs
Eric Esposito is a freelance contributor on MoneyWise with an interest in financial markets, investing, and trading. In addition to MoneyWise, Eric’s work can be found on financial publications such as WallStreetZen and CoinDesk. When not researching the latest stock market trends, Eric enjoys biking, walking his dog, and spending time with family in Central Florida. Eric holds a BA in English from Quinnipiac University.
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