The Ultimate Dividend Growth Stock to Buy With $2,000 Right Now

It's common knowledge that dividend stocks tend to attract more conservative investors. While these stocks rarely experience rapid growth, they tend to be well-suited for wealth preservation and income generation.

Fortunately, many of these stocks also increase their payouts periodically, bolstering their value as long-term holdings. If one is looking to start building a position by investing $2,000 in such a stock, Home Depot (NYSE: HD) is likely an excellent option, and here's why.

Home Depot as a dividend stock

Income investors will like that Home Depot has hiked its dividend for 17 straight years. The retail stock suspended increases in the late 2000s amid the housing crisis. Still, annual payout hikes had also been the norm since Home Depot's first dividend payment in 1987.

At approximately $330 per share, about $1,980 will buy an investor six shares of Home Depot.

Currently, Home Depot shareholders earn $9.32 per share annually in dividends, totaling $55.92 in yearly dividend income for six shares. This amounts to a dividend yield of 2.8%, far above the S&P 500's (SNPINDEX: ^GSPC) average of 1.1%.

Investors can likely expect the payout hikes to continue. Over the trailing 12 months, Home Depot generated just over $15.1 billion in free cash flow, well above the $9.3 billion the payout cost the company over the same period. That leaves ample room for rising payouts and investments in the company.

The focus on wealth preservation

As mentioned, today's Home Depot stock is best-suited for investors focused on rising dividend income and wealth preservation. With a footprint of more than 2,360 stores, the company now adds few new locations annually. The U.S. and Canadian markets offer little opportunity for new development, and past efforts at international expansion failed, effectively limiting growth.

Nonetheless, Home Depot has responded to that challenge by leaning into strategies such as targeting professional contractors in addition to its traditional do-it-yourself customer base. Omnichannel retail, private label brands, and value-added services and rentals have also boosted revenues.

Amid that approach, it reported $89 billion in revenue in the first half of 2026, a 5% yearly increase. Net income rose by under 1% to almost $8.1 billion over the same period due to higher operating costs.

However, some of that spending is investment in digital capabilities and expanded supply chain facilities. That could bring efficiencies that boost profits longer term, which should foster continued dividend growth and, eventually, a higher stock price that could make it worth holding for a decade.

Investing in Home Depot

A $2,000 investment in Home Depot stock could be the start of a growing income stream.

Admittedly, the company is unlikely to deliver rapid revenue and profit growth. Still, the need to maintain and update properties is ongoing, and Home Depot is well-positioned to meet it for individuals and businesses alike. That makes it likely that revenue and earnings will continue to increase.

Moreover, it has delivered dividend growth in almost every year since 1987, and its payout is well above the S&P 500 average. Given that its free cash flow is well above the cost of the dividend, Home Depot will probably maintain its track record of rising payouts for a long time to come.

Will Healy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Home Depot. The Motley Fool has a disclosure policy.