As of this writing, there are only seven businesses that have a valuation that exceeds $1 trillion. Investors looking to score huge gains might be on the lookout for smaller companies that have the potential to make it in this exclusive club one day.

Luckily, you don't need to look that far. I believe this top dividend stock will join the trillion-dollar club by 2040. Let's take a closer look.

Shareholder payouts

After its Q1 2024 quarterly dividend payout in March, Home Depot (HD 2.24%) has now paid a dividend in 148 straight quarters. That's a fantastic streak of consistently paying its investors. It's also encouraging to know that the business has raised the dividend steadily as well, with the payout going from $0.47 in Q1 2014 to $2.25 most recently.

Why has Home Depot been able to do this for such an extended period? It's because the company has long been profitable. In fact, its net income has expanded over time, going from $11.1 billion in fiscal 2018 to over $15.1 billion last year, boosted by healthy and durable demand for the tools and supplies it sells for DIY and professional customers. Income investors have a lot to like about this track record.

Industry tailwinds

Because of the uncertain macroeconomic environment the U.S. has been in, Home Depot has been negatively affected. Higher interest rates and inflationary pressures discourage shoppers from wanting to spend on bigger discretionary purchases, or at least not as much as they did even just three years ago.

As a result of this headwind, Home Depot reported a 3.2% same-store sales dip in fiscal 2023 (ended Jan. 28, 2024), with this metric expected to fall 1% in the current fiscal year. I'm sure these weaker demand trends can partly explain why the stock is currently sitting 19% below its peak price.

It's easy to focus too much on the short-term trends. But this can distract you from what really matters. Home Depot benefits from some favorable long-term tailwinds.

For starters, the home improvement industry is huge and fragmented. The market is estimated to be worth $1 trillion. Based on Home Depot's trailing 12-month sales of $153 billion, it only commands 15% of the entire industry. This is despite being the largest company in the sector by far. There is a ton of opportunity to continue stealing market share from smaller operators who don't have the brand recognition or scale advantages of Home Depot.

Speaking more to the housing industry broadly, the U.S. has a housing shortage. There aren't enough new homes to satisfy demand. This backdrop encourages people to focus on home upgrades and renovations, which directly supports Home Depot.

I'll also point out that the median age of a home in the U.S. is roughly 40 years. More houses are 40 years old or older today than there were a decade ago. Again, this benefits a business like Home Depot.

The math

For Home Depot to get to a $1 trillion market cap by 2040, its valuation would need to roughly triple over the next 16 years, translating to a 7.1% annualized pace. I believe this is reasonable. In the past 16 years, its market cap has expanded nearly seven-fold. It's realistic to expect the rate of growth to decline somewhat.

This is a competitively advantaged enterprise that has a storied history of rewarding its shareholders. It's going through some challenges right now, but those should prove to be short-lived. I'm confident that it can grow revenue and earnings over the long haul.

Shares trade at a price-to-earnings ratio of 22.2. That's in line with the trailing 10-year average. That's a good setup for investors looking to find the next trillion-dollar company. You just have to have a little patience.