Is DHI a good stock to buy? We came across a bullish thesis on D.R. Horton, Inc. on The Passive Income Portfolio’s Substack. In this article, we will summarize the bulls’ thesis on DHI. D.R. Horton, Inc.’s share was trading at $139.04 as of March 12th. DHI’s trailing and forward P/E were 12.98 and 13.09, respectively according to Yahoo Finance.
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D.R. Horton, Inc. operates as a homebuilding company in East, North, Southeast, South Central, Southwest, and Northwest regions in the United States. DHI is highlighted as a compelling dividend compounder under the “safety cushion” strategy, which focuses on companies with low payout ratios and strong cash generation that allow dividends to grow sustainably over long periods.
While many investors avoid homebuilders due to the cyclicality associated with interest rates and housing demand, D.R. Horton has differentiated itself by industrializing the homebuilding process and focusing primarily on entry-level homes, a segment where demand continues to significantly exceed supply.
This positioning enables the company to maintain strong sales volumes and cash generation even during uncertain housing cycles. The company’s financial profile further strengthens the investment case, particularly its ability to generate substantial free cash flow.
In fiscal 2024, D.R. Horton produced more than $2 billion in operating cash flow, allowing the company to comfortably fund dividends without relying on debt or financial engineering. Its dividend policy remains extremely conservative, with a payout ratio of roughly 11%, meaning only a small portion of earnings and cash flow is currently distributed to shareholders.
The balance sheet also stands out within the capital-intensive homebuilding industry, with net debt to EBITDA of approximately 0.46x and no significant near-term maturities that could pressure liquidity.
This financial flexibility allows the company to continue investing in growth while returning capital to shareholders. D.R. Horton recently demonstrated its confidence in its financial strength by increasing its dividend by 33%. Given the extremely low payout ratio, the company has substantial room to continue raising its dividend at a double-digit pace for several years while still maintaining a conservative payout profile, making it an attractive long-term dividend growth opportunity.
Previously, we covered a bullish thesis on D.R. Horton, Inc. (DHI) by Let it Compound in May 2025, which highlighted the company’s dominant U.S. homebuilding scale, decentralized operating model, capital-efficient land strategy, and strong profitability supporting long-term compounding. DHI’s stock price has appreciated by approximately 10.57% since our coverage. The Passive Income Portfolio shares a similar view but emphasizes DHI’s low payout ratio, strong free cash flow, and long runway for dividend growth.
