Lowe’s Companies, Inc. LOW has always been a favorite pick for investors seeking both steady income and growth. This Mooresville, NC-based company with a strong history of dividend payments as well as sound fundamentals provides a hedge against any odd swings in the market. Lowe's strong cash flow generation capability has enabled consistent dividend raises over time.
This home-improvement retailer once again rewarded investors with a hike in the dividend payout. Lowe’s board of directors raised the quarterly dividend by 5% to $1.10 per share, bringing the new annualized dividend to $4.40 per share and resulting in a dividend yield of 2.1%. The new dividend is payable Aug 9, 2023, to its shareholders of record as on Jul 26, 2023.
In May 2022, LOW hiked its regular quarterly dividend by 31.3% to $1.05 per share. Backed by sound fundamentals and financial strength, Lowe’s has consistently proven its commitment to enhancing shareholder value. In the first quarter of fiscal 2023, the company bought back 10.6 million shares for $2.1 billion and paid out dividends of $633 million. During fiscal 2022, the company repurchased 71 million shares for $14.1 billion. These efforts reflect better-than-expected operating performance and the company’s commitment to return excess capital to shareholders.
As of May 5, 2023, LOW ended the quarter with cash and cash equivalents of $2,950 million. Lowe’s generated cash flow from operations of $2,106 million for the first quarter of fiscal 2023.
Lowe's is gaining traction with its Total Home strategy which includes providing complete solutions for various types of home repair and improvement needs. The strategy is an extension of the company’s retail-fundamentals approach. Management highlighted that the new strategy focuses on strengthening customer engagement and market share, especially through an intensified focus on Pro customers. Moreover, the initiative encompasses improving the online business, refurbishing installation services and enhancing localization efforts.
Image Source: Zacks Investment Research
A strong digital base has been aiding performance for a while. Management continues making investments in omnichannel capabilities to drive growth. These areas include expanding the online assortment, boosting the user experience and improving fulfillment. Lowe’s is also expanding its market delivery. Management is on track with advancing the same-day and next-day fulfillment capabilities. Meanwhile, its focus on perpetual productivity improvement or PPI initiative, has also been yielding.
Impressively, Lowe’s has outpaced the industry in the past three months, buoyed by the aforementioned catalysts. We note that shares of this Zacks Rank #3 (Hold) player have increased 6.2% in the same time frame, compared with the industry’s 1.8% gain.
Solid Picks in Retail
We have highlighted three top-ranked stocks, namely Abercrombie & Fitch ANF, Urban Outfitters URBN and Hibbett Sports HIBB.
Abercrombie & Fitch, a leading casual apparel retailer, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales and earnings per share (EPS) suggests growth of 2.1% and 472%, respectively, from the year-ago reported figures. ANF delivered a negative trailing four-quarter earnings surprise of 141.2%.
Urban Outfitters, a retailer of fashion apparel, accessories and footwear, currently carries a Zacks Rank #2 (Buy). URBN delivered break-even earnings in the last reported quarter.
The Zacks Consensus Estimate for Urban Outfitters’ current financial-year sales and EPS suggests growth of 4% and 40.6%, respectively, from the year-ago reported figures.
Hibbett, a sporting goods retailer, currently carries a Zacks Rank of 2. The company has a negative trailing four-quarter earnings surprise of 13.9%, on average.
The Zacks Consensus Estimate for Hibbett’s current financial-year sales suggests growth of 5.7% from the year-ago reported figure.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report