Lowe's (LOW) Could Be a Great Choice
Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
Cash flow can come from bond interest, interest from other types of investments, and, of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Headquartered in Mooresville, Lowe's (LOW) is a Retail-Wholesale stock that has seen a price change of -3.45% so far this year. The home improvement retailer is currently shelling out a dividend of $1.20 per share, with a dividend yield of 2.01%. This compares to the Retail - Home Furnishings industry's yield of 1.12% and the S&P 500's yield of 1.52%.
Looking at dividend growth, the company's current annualized dividend of $4.80 is up 5.5% from last year. Over the last 5 years, Lowe's has increased its dividend 5 times on a year-over-year basis for an average annual increase of 17.45%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Lowe's's current payout ratio is 39%, meaning it paid out 39% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for LOW for this fiscal year. The Zacks Consensus Estimate for 2025 is $12.29 per share, with earnings expected to increase 2.42% from the year ago period.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, LOW is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of #3 (Hold).
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Lowe's Companies, Inc. (LOW): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
Source Zacks-com
