Home Depot (HD 0.62%) stock has delivered a dividend-adjusted total return of roughly 25% this year. While that's certainly nothing to sneeze at, the performance has actually lagged behind the S&P 500 index's total return level of 29%.

What comes next for the home-improvement retail leader? Read on to see why two Motley Fool contributors have differing takes on the investment performance outlook for Home Depot stock.

Keith Noonan: With Home Depot stock marching higher this year, the company's valuation has been pushed up to levels that may raise the question of whether now is the right time to invest in the business.

The stock trades at roughly 27 times this year's expected earnings, which is a forward price-to-earnings multiple that looks relatively high on a historical basis. On the other hand, Home Depot is a great company that warrants some level of a valuation premium and looks like a worthwhile buy-and-hold investment over the next five-year period.

Home Depot has seen relatively muted growth amid the high interest rate environment, but the Federal Reserve's shift to rate cutting and the potential for significant deregulation under the incoming Trump administration could help reenergize performance. With lower rates, construction and home improvement projects that have been delayed could start happening in greater numbers.

There's admittedly no surefire guarantee that these tailwinds will arrive, and developments such as substantial new tariffs or rising Treasury bond yields could create adverse conditions. However, trends toward the normalization of interest rates, bond yields, and the housing market should eventually lead to an increase in remodeling demand.

Home Depot's business sees significant cyclical impacts depending on the state of the housing market, and it's hard to say how exactly dynamics will shape up in the near term. But without guessing where exactly the housing market is in its cycle, there's a good chance that the backdrop will see some sustained periods of significant improvement over the next five years.

Meanwhile, the company pays a dividend that yields roughly 2.2%. That's not a massive yield by any stretch of the imagination, but the payout is well covered, and the company has delivered reliable payout increases. The dividend is up 50% over the last five years and 281% over the last decade.

Home Depot remains a great business with a solid competitive moat. The company has consistently executed at a high level over the last decade, and it enjoys fantastic economies of scale and distribution advantages that should only be strengthened by its acquisition of SRS Distribution. The retail giant also has a great brand.

So, while it may not be the most exciting stock in the S&P 500, I think there's a good chance it will still beat the market over the next half-decade.

Lee Samaha: Home Depot is an obvious beneficiary of a lower interest rate environment. After all, lower interest rates reduce mortgage rates, which supports the housing market and, ultimately, home improvement store sales. However, the market has already priced in a recovery, given that Home Depot trades on more than 26 times its estimated 2025 earnings.

Moreover, while the Federal Reserve has cut its rate, market and mortgage rates have remained stubbornly high. This could indicate a reluctance to believe that the battle over inflation has been won yet.

Furthermore, as you can see below, house prices remain elevated while affordability, notably for first-time buyers, remains relatively low. A more pronounced cut in interest and mortgage rates might be needed to stimulate the housing market in 2025, and it's unclear if that will happen.

Overall, while the housing market is likely to improve in 2025, it's far from clear that Home Depot will see a significant increase in existing home sales -- a metric that typically drives home improvement sales growth. Given its rich valuation, there are better ways to play the housing theme than Home Depot.