Lowe’s Chases Home Depot by Raising Dividend — a Lower Yield but Better Value

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.