They may be in different industries, but Disney (DIS -0.02%) and Home Depot (HD 1.25%) are both long-term winning stocks that investors love. Both are currently within 10% of all-time highs, so neither stock really presents a superior opportunistic entry point. 

Therefore, to know which stock is a better buy, let's dissect which has greater potential to offer market-beating shareholder returns.

A man thinks while holding a pen and paper.

Image source: Getty Images.

The case for Home Depot

The home-improvement retail chain has a long growth history, but its sales don't always increase. Specifically, consumer-discretionary spending tends to fall during recessions, which led to a decline in net sales for Home Depot in 2008 and 2009. Our present coronavirus recession is unusual in that regard: Home Depot's net sales are up 16% year over year in the first half of 2020.

HD Chart

HD data by YCharts. U.S. recessions displayed in gray. TTM = trailing 12 months.

U.S. consumers received stimulus checks and were stuck at home, a combo allowing them to finally tackle domestic to-do lists. Home Depot likely benefited from these factors, and it's possible some sales were pulled forward. Therefore, I wouldn't be surprised if the company's sales growth moderates in coming quarters. Sales growth could even turn negative if the recession gets worse.

In the earnings call for the second quarter of 2020, CFO Richard McPhail said, "We do believe in the resilience of home improvement demand over the long term." This sentiment has proved true over the years; people spend to maintain and upgrade their living spaces. That said, even when experiencing a temporary sales decline, Home Depot has demonstrated its ability to operate a profitable business. 

HD Payout Ratio Chart

HD payout-ratio data by YCharts.

Home Depot takes its profits and rewards shareholders. The company has paid a quarterly dividend every quarter since it was initiated in 1987, and has annually raised the dividend except during the Great Recession, when it held steady. Furthermore, the dividend payout is up over 500% during the past decade. That's phenomenal dividend growth but surprisingly not excessive; it's in line with earnings-per-share growth. That means there's plenty of room for further dividend growth considering its current payout ratio (the amount of earnings paid out as dividends) is around 50%. 

The better case for Disney

What I'm describing with Home Depot is a stable, mature business that can continue to provide positive shareholder returns. But I don't expect it will turn heads with explosive new growth avenues. Contrast that with Disney. The House of Mouse is taking its intellectual property and leveraging it into a lucrative direct-to-consumer business. 

The success of the launch of Disney+ can't be overstated. In its investor day presentation in April 2019, the company set the goal of 60 million to 90 million Disney+ subscribers by the end of 2024. Less than one year since launch, it already has 60.5 million global subscribers.

This feat is truly astounding considering Disney+ has little new content. The service only had 10 original projects at launch, but it's expected to scale to produce 60 original projects annually by the end of 2024. In other words, consumers wanted to subscribe now mostly for Disney's classic properties. The allure of exclusive content, however, should get stronger over time. 

A television screen displays original content from Disney+.

Image source: The Walt Disney Company.

Netflix has one business: a streaming-video subscription service. It currently has close to 200 million subscribers worldwide. Given the success of Disney+ so far, and the original content to come, I don't see why it couldn't rival Netflix's subscriber count within five years. Granted, Disney charges less than Netflix, so the revenue stream won't flow as strongly. But it's still meaningful growth for this mega-cap company.

And remember that Disney's overall business, unlike Netflix, is far more than a subscription service. It has theme parks, blockbuster films, merchandise, and more all generating revenue. The launch of Disney+ takes very little away from any existing business; it mostly adds a completely new recurring revenue stream. 

I don't wish to imply a Disney investment is risk-free. In particular, the increase to the company's debt position is concerning. In 2018, its borrowings were around $20 billion. Since then, it acquired media assets from Fox in a $71 billion deal. And with COVID-19 closing theme parks, canceling cruises, and delaying films, the company borrowed billions more. Borrowings currently sit at $54 billion compared with $23 billion in cash and equivalents.

This is a lot of debt, and there's the looming threat that the coronavirus could flare back up and stall any recovery progress. But as I think long term, I believe we will get past the threat of COVID-19 and Disney fully returns to being Disney. Only now, it runs a baby Netflix -- a compelling reason to pick Disney stock over Home Depot today.