Housing

Lowe's Chases Home Depot by Raising Dividend -- a Lower Yield but Better Value

Lowe’s Companies Inc. (NYSE: LOW) has held its annual meeting of shareholders. While the construction and repairs retailer reelected board members, approved compensation plans and ratified its accounting firm’s appointment, the big news is that Lowe’s agreed to raise its dividend. This higher dividend is a gain of about 12.5% for its payouts. What investors need to measure up is the value case for Lowe’s against a better dividend from rival Home Depot Inc. (NYSE: HD).

Shareholders will now receive a dividend payout of $0.18 per share per quarter, versus a prior $0.16 dividend. Based on a $42.63 share price. the new dividend yield will be a hair under 1.7%. Lowe’s management said that it now expects the momentum that it gained in 2012 to accelerate in 2013.

Today’s dividend is payable on August 7, 2013, to shareholders of record as of July 24, 2013. Lowe’s said that it has declared a cash dividend each quarter since going public in 1961.

The dividend hike from Lowe’s follows a similar dividend hike from rival and DJIA component Home Depot Inc. (NYSE: HD). The difference is that Home Depot’s dividend hike went from $0.29 to $0.39 per quarter, a gain of 34% versus the gain of 12.5% for the payout from Lowe’s. Home Depot’s dividend yield is also closer to 2%, rather than the 1.7% new rate from Lowe’s.

With Lowe’s shares at $42.63, the 52-week trading range is $24.76 to $43.84. As far as how Lowe’s compares to Home Depot in size, the Thomson Reuters sales estimates for this year is $52.1 billion for Lowe’s, while it has a market cap of more than $46 billion. Thomson Reuters expects Home Depot revenues to be $77.3 billion, but its market cap is closer to $117 billion. Home Depot trades at 22.1 times expected earnings, with sales growth expected to be 3.5% this year, while Lowe’s trades at 20.5 times expected earnings, with an expected 3.2% sales growth this year.

Find a Qualified Financial Advisor (Sponsor)

Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you’re ready to be matched with local advisors that can help you achieve your financial goals, get started now.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.