Investors just don’t understand Home Depot (HD).
They see the world’s biggest home-improvement retailer as a proxy for the real estate market: When home sales are strong, the thinking goes, more people buy homes—and go on to renovate them.
Makes sense. But it’s only half the story (at best!).
It’s true that many people—your income strategist included—locked in a sweet mortgage rate during the pandemic. So why would they give that up for today’s budget-busting 30-year rates?
With that in mind, it’s no surprise that, as mortgage rates have climbed this year, HD’s stock has slipped, erasing a big gain in early 2026 (see in purple below):
Rising Mortgage Rates Squeeze HD’s Stock
It’s left HD shares just below where they were at the start of 2026, while the S&P 500 has popped just shy of 12%, as of this writing.
That’s a big gap, and a sweet second chance to buy for us. Because the truth is, this stock—a holding of my Hidden Yields dividend-growth advisory—is much more than a real-estate tracker. It’s a beach ball held underwater.
I say that because the crowd is overlooking the two real upside drivers here.
But there is a sign they’re starting to catch on. These two catalysts were hinted at in the company’s latest earnings report, which dropped the morning of August 18. Investors initially shrugged off the report, with the stock gaining only marginally that day. A bigger move came the next day.
HD’s “Delayed Reaction” Earnings Pop
Overall, the retailer beat expectations on the top and bottom lines. But two things stood out: customers spent more on smaller projects, and Home Depot’s Pro service booked solid growth.
We’ve been talking about Pro in Hidden Yields for some time. Thanks to a couple recent acquisitions, it’s now a top-to-bottom supplier for contractors.
That’s a big deal—and it doesn’t get the attention it deserves.
Five years ago, a contractor who’d just landed a big job would’ve called three or four suppliers to get what they needed. Now they can wander up to the local Home Depot’s Pro desk (or order online) and everything arrives from one source, on one truck.
Pro is vital because it makes HD’s revenue “sticky.” More to the point, growth in both smaller projects and Pro in the latest quarter point to our two real (and underappreciated) upside catalysts for the stock.
Home Depot’s 2 Misunderstood Growth Drivers
You see, the herd has HD’s relationship to the real estate market backward. Sure, high mortgage rates mean fewer people are moving. That’s first-level thinking.
But we’re second-level thinkers at Hidden Yields. And here’s what the “simple folk” miss: All those “house hoarders” are trading their new-home dreams for dreams of, say, a new kitchen or a new bathroom.
Truth is, America is on the verge of “Home Reno Boom 2.0” (Home Reno Boom 1.0, you may recall, came during the pandemic, when we all thought we might never venture out again.) This time, it’s fueled by high mortgage rates. The logic is simple: If you can’t move, then you may as well upgrade your current place.
The numbers bear this out. According to Harvard University’s Joint Center for Housing Studies, reno spending was around $517 billion in the second quarter of 2026, up around 2% year-over-year. It’s also well up from the $498 billion we saw as recently as the third quarter of 2024.
Here’s the thing most people are missing, though: Homeowners already have the funding lined up for the next reno wave. It comes in the form of home-equity lines of credit, or HELOCs, which many homeowners use to finance renos.
In the second quarter, the national HELOC balance rose by $13 billion, to a total of $459 billion, according to the Federal Reserve Bank of New York. That’s a sweet setup for our pandemic refinancers (and HD shareholders): Homeowners get to keep their cheap mortgages while tapping their home equity to renovate—and boost their home values.
That’s the first upside driver for HD.
The second is even more straightforward: American homes are getting old, with an average age of 44 years. These houses need new roofs. They need new pipes. The HVAC is about to wheeze its last breath. None of these problems care about bond yields, mortgage rates, Middle East conflicts or AI. They need to be fixed—stat.
Add these two together—big HELOC balances and America’s aging housing stock—and you get the perfect “launchpad” for Home Reno Boom 2.0. Home Depot’s latest results—and the herd’s move into the stock as a result—show the fuel is already in the tank.
The fact that the stock trails the market this year shows we’re not too late. So does another factor that’s tied straight into the company’s dividend.
HD’s “Dividend Magnet” Confirms the Stock Is Cheap
HD’s dividend is something first-level thinkers rarely pay much attention to. That’s because its 2.8% yield is “ho-hum” on the surface. That’s about as far as these folks go!
But they’re missing three key things:
- Even though that 2.8% is “low,” it’s still nearly triple the payout on the typical S&P 500 stock.
- HD’s payout has grown 238% in the last decade. That means anyone who bought 10 years ago isn’t getting a 2.8% yield on their upfront buy: They’re bagging 6.9%, thanks to that strong payout growth!
- Finally, that dividend is a magnet on the share price, pulling it up as it rises.
Let’s consider that last point because when you see this “Dividend Magnet” laid out on a chart covering the last 10 years, you’ll see that the pattern is unmistakable:
HD’s Dividend Magnet in Action
Here you can see the effect of a rising dividend on the share price: Every hike pulls the stock up with it. This is why the current yield on HD shares is always around 2.8%.
Here’s the thing, though: As you can see above, the stock has fallen off the pace lately, just as rising mortgage rates scared more first-level investors off HD shares.
That gap is our upside, and I expect it to close as Home Reno Boom 2.0 kicks off—and more investors realize what it means for this unloved stock. The time to buy is now, before that realization dawns.
Urgent Buy Recommendation Just Released: Get It Below
In this month’s Hidden Yields, which came out just a couple days ago, I recommended a pharma stock that’s gushing dividend cash.
There’s still time to get in, and I want to make sure you do.
Like Home Depot, this one’s unloved for the silliest of reasons: It froze its payout from 2009 to 2014, and investors are still in a snit over it. Well, that and the fact that this stock currently yields a meager 0.5%.
Those two things have blinded most people to the fact that this pharma firm has a tiger by the tail in the form of a string of successful drug releases.
That’s given management a unique problem: They can’t shovel cash out the door to investors fast enough! Last year, they hiked payouts more than 15%, and that still wasn’t enough: Earnings have nearly doubled year over year, revenue has soared nearly 50%, and gross margins are an elite 86%.
As I write, this company pays just 19% of profits as dividends, putting an even bigger hike (and corresponding rise in the share price—thank you, Dividend Magnet!) on the table.
Here’s how you can get in:
Click here for an exclusive briefing on my Hidden Yields system. It reveals all the details on how it works, 5 more recession-resistant dividend growers I’m pounding the table on now, and an offer to try the service out 100% risk-free for the next 60 days.
Start your no-risk trial to Hidden Yields now, you have nothing to lose.