Stead, 30, who began his career at Huddersfield after progressing through the club's academy, turned down several other offers to return to West Yorkshire in the summer from Bristol City, who lost their relegation battle last season.
"A top-half finish is a minimum target for us this season," Stead told Press Association Sport.
"I think everyone would be very disappointed if we finished below that.
"We're obviously looking to improve on where we finished last season, any progression is better, but with the squad we've got and the way we've started the season, I think if we finished bottom half we'd be very disappointed."
Stead stressed it is was not just the thought of returning home that attracted him back to the John Smith's Stadium.
He added: "It's difficult to gauge things like promotion when you arrive in pre-season, before you get all the players in, but looking at the squad and the few other options I had with other clubs, it was obviously a massive factor.
"I also had the emotional ties with Huddersfield. I am a Town supporter, but I also thought they had a good enough squad to push for promotion, to try and get in the play-offs and see what happens.
"I felt that the timing was right for me to come back here. I want to keep improving as a player at a club that is geared up to keep progressing."