Home Depot (NYSE:HD) has become a huge success story for its long-term investors. Founders Bernie Marcus and Arthur Blank pioneered the hardware superstore concept that offers a vast selection, attractive prices, and a trained staff.

More than 40 years after opening the first Home Depot location, this concept continues to benefit home improvement shoppers and investors. Today, with One Home Depot, the company leverages an omnichannel strategy that combines in-store and online presence to give shoppers a seamless buying experience.

One Home Depot shows that the company continues to do what it must to remain competitive. Still, while Home Depot stock will probably remain appealing to long-term investors, the company's long-term growth path remains uncertain.  

Home Depot today

On the surface, Home Depot is well-positioned for prosperity. It continues to register growth amid an ongoing competitive battle with archrival Lowe's and, to a lesser extent, companies such as Tractor Supply, McCoy's Building Supply, and numerous other retailers.

However, its stock, if anything, appears somewhat overvalued. It trades at just over 24 times forward earnings. However, with predicted earnings growth of 10.5% for this year set to give way to 5.2% in the next fiscal year, this could leave Home Depot unable to support its current valuation.

Closeup of ruler, level, hammer, paint brush, and nails.

Image source: Getty Images.

Still, despite slower growth, the stock should continue to appeal to long-term and conservative investors, if only for its dividend. Its current annual payout of $6 per share yields approximately 2.2%. This gives income-oriented investors a payout above the current 1.8% average for the S&P 500. Also, the dividend payout ratio, or the percentage of net income paid in dividends, now stands at around 52%. At this rate, the company can likely afford to continue the payout hikes.

Furthermore, conditions seem to play in Home Depot's favor for now. A combination of lockdowns, joblessness, and stimulus checks has stoked an increased interest in home improvement. In the most recent quarter, sales increased by more than 23% from year-ago levels. Diluted earnings per share rose by nearly 27%.

Where is Home Depot going?

Analysts expect that a decline in COVID-19 cases will reduce interest in home improvement. This will mean the stellar second-quarter numbers will probably not last. Moreover, store counts have changed little over the last few years. The current store count of 2,291 is only 17 stores more than in fiscal 2015.

These stores counts also imply that both the U.S. and Canada have come close to reaching saturation points. Furthermore, though the company announced it would build four additional stores in Mexico, market expansion may only come slowly, even in this less-saturated market.

This does not mean the company will stop growing completely. Home Depot has geared itself more toward e-commerce and the contractor market. To this end, Home Depot recently announced it would open three new distribution centers in the Atlanta area alone.

Still, such moves do not negate the need for Home Depot to find additional areas where it can expand. If the company cannot find a way to expand beyond North America, predictions of much slower growth after the current fiscal year may prove true.

Home Depot should continue to benefit from the need for homeowners to repair and improve their dwellings. Moreover, the dividend remains safe and should stay on track for subsequent increases. Nonetheless, without an obvious avenue for expansion, investors in this retail stock may have to prepare themselves for slower growth going forward.