In This Article:
The home improvement industry has witnessed a boom in the past three years as homeowners looked for ways to make better entertainment and work-from-home spaces. Revamping interiors and exteriors, do-it-yourself (DIY) projects for decorating and maintaining furniture and fixtures, and hiring professionals for enjoyable and comfortable home upgrades have been gaining popularity lately.
The inflation-ridden economy has kept a check on home-buying activities. Experts believe that home remodeling projects will decline in 2023 due to the slowdown in existing home sales, house price appreciation and mortgage refinancing activity. Consequently, home improvement stocks are expected to witness modest growth in 2023.
Recent trends reveal that homeowners are pulling back from big-ticket discretionary project spends due to rising inflation. Instead, customers continue to focus on maintenance projects like spending on essential replacements and smaller repair projects.
Nonetheless, investments in the expansion of digital and omni-channel capabilities, the execution of growth strategies, and acquisitions are likely to aid home improvement companies in the long term.
Despite the recent slowdown in demand, the home improvement industry is an attractive investment place. Dividend-paying stocks in the industry further provide investors with opportunities to enhance their rewards. Dividend-paying stocks are non-cyclical, i.e., their performances are not linked to the larger economy. The companies consistently raise dividend payouts, reflecting their confidence in their earnings growth potential.
With the help of the Zacks Stock Screener, we have selected two stocks in the Zacks Building Products – Retail industry with a Zacks Rank #3 (Hold) and a dividend yield of more than or equal to 2%. The stocks also have a five-year dividend growth history and a payout ratio of less than 60, reflecting enough room for future dividend increases.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The above-mentioned combination is compelling for investors interested in long-term income based on stability amid volatility.
Our Choices
Stocks like Home Depot, Inc. HD and Lowe’s Companies LOW, which regularly boost dividend payouts, not only offer investors the opportunity to gain from the industry’s growth prospects but also provide insulation against the tough macro environment.
Home Depot: The Atlanta, GA-based company is the world’s largest home improvement specialty retailer based on net sales. HD has been benefiting from ongoing investments in the One Home Depot plan. Continued strength in the Pro and DIY categories, and digital momentum have been the key drivers. Its interconnected retail strategy and underlying technology infrastructure have helped boost web traffic for the past few quarters, aiding digital sales.