Is DHI a good stock to buy? We find a bullish thesis on DR Horton, Inc. in The Passive Income Portfolio substack. In this article we will summarize the bulls’ thesis on DHI. DR Horton, Inc. stock was trading at $139.04 on March 12. DHI’s trailing and forward P/E was 12.98 and 13.09, respectively, according to Yahoo Finance.
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DR Horton, Inc. operates as a home construction company in the eastern, northern, southeastern, south central, southwest and northwest regions of the United States. DHI stands out as a compelling dividend composite 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, DR Horton has differentiated itself by industrializing the homebuilding process and focusing primarily on entry-level housing, a segment where demand continues to significantly outpace supply.
This positioning allows the company to maintain strong sales volumes and cash generation even during uncertain real estate cycles. The company’s financial profile further strengthens the investment case, particularly its ability to generate substantial free cash flow.
In fiscal 2024, DR 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 around 11%, meaning only a small portion of profits 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 0.46 times and no significant near-term maturities that could put pressure on liquidity.
This financial flexibility allows the company to continue investing in growth while returning capital to shareholders. DR 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 growing its dividend at a double-digit pace for several years while maintaining a conservative payout profile, making it an attractive long-term dividend growth opportunity.
Previously, we covered a bullish thesis on DR Horton, Inc. (DHI) from Let it Compound in May 2025, which highlighted the company’s dominant US homebuilding scale, decentralized operating model, capital-efficient territory strategy, and strong profitability supporting long-term capitalization. The DHI share price has appreciated 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.