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Lowe's Companies Inc's Dividend Analysis

Assessing the Sustainability of Lowe's Upcoming Dividend Payment

Lowe's Companies Inc (NYSE:LOW) recently announced a dividend of $1.1 per share, payable on 2024-05-08, with the ex-dividend date set for 2024-04-23. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Lowe's Companies Inc's dividend performance and assess its sustainability.

What Does Lowe's Companies Inc Do?

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Lowe's Companies Inc is the second-largest home improvement retailer in the world, operating more than 1,700 stores in the United States, after the 2023 divestiture of its Canadian locations (RONA, Lowe's Canada, Reno-Depot, and Dick's Lumber). The firm's stores offer products and services for home decorating, maintenance, repair, and remodeling, with maintenance and repair accounting for two thirds of products sold. Lowe's targets retail do-it-yourself (around 75% of sales) and do-it-for-me customers as well as commercial and professional business clients (around 25% of sales). We estimate Lowe's captures a high-single-digit share of the domestic home improvement market, based on U.S. Census data and management's market size estimates.

Lowe's Companies Inc's Dividend Analysis
Lowe's Companies Inc's Dividend Analysis

A Glimpse at Lowe's Companies Inc's Dividend History

Lowe's Companies Inc has maintained a consistent dividend payment record since 1963. Dividends are currently distributed on a quarterly basis. Lowe's Companies Inc has increased its dividend each year since 1963. The stock is thus listed as a dividend king, an honor that is given to companies that have increased their dividend each year for at least the past 61 years. Below is a chart showing annual Dividends Per Share for tracking historical trends.

Breaking Down Lowe's Companies Inc's Dividend Yield and Growth

As of today, Lowe's Companies Inc currently has a 12-month trailing dividend yield of 1.89% and a 12-month forward dividend yield of 1.91%. This suggests an expectation of increased dividend payments over the next 12 months.

Over the past three years, Lowe's Companies Inc's annual dividend growth rate was 23.70%. Extended to a five-year horizon, this rate decreased to 20.00% per year. And over the past decade, Lowe's Companies Inc's annual dividends per share growth rate stands at an impressive 19.60%.

Based on Lowe's Companies Inc's dividend yield and five-year growth rate, the 5-year yield on cost of Lowe's Companies Inc stock as of today is approximately 4.70%.

Lowe's Companies Inc's Dividend Analysis
Lowe's Companies Inc's Dividend Analysis

The Sustainability Question: Payout Ratio and Profitability

To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2024-01-31, Lowe's Companies Inc's dividend payout ratio is 0.33.

Lowe's Companies Inc's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Lowe's Companies Inc's profitability 9 out of 10 as of 2024-01-31, suggesting good profitability prospects. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.

Growth Metrics: The Future Outlook

To ensure the sustainability of dividends, a company must have robust growth metrics. Lowe's Companies Inc's growth rank of 9 out of 10 suggests that the company's growth trajectory is good relative to its competitors.

Revenue is the lifeblood of any company, and Lowe's Companies Inc's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Lowe's Companies Inc's revenue has increased by approximately 7.40% per year on average, a rate that outperforms approximately 56.2% of global competitors.

The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Lowe's Companies Inc's earnings increased by approximately 13.90% per year on average, a rate that outperforms approximately 53.54% of global competitors.

Lastly, the company's 5-year EBITDA growth rate of 21.20%, which outperforms approximately 74.27% of global competitors.

Next Steps

Considering Lowe's Companies Inc's consistent dividend growth, manageable payout ratio, and strong profitability and growth metrics, the company's dividends appear sustainable in the medium to long term. Investors seeking income-generating stocks with a track record of dividend growth might find Lowe's an attractive option. Moreover, the company's solid financial health and growth prospects may provide further confidence in its ability to continue rewarding shareholders. As always, it's crucial for investors to conduct their own due diligence before making investment decisions.

GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.

This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.

This article first appeared on GuruFocus.