Lowe’s Companies Inc.: Attractively Valued Dividend Aristocrat for Total Return

Lowe’s Companies Inc.: Attractively Valued Dividend Aristocrat for Total Return


Much of my dividend growth investing is currently focused on looking for high quality dividend growth stocks that are yielding 3% or better. The reason is quite simple. I am managing dividend growth portfolios for clients that are retired and require at least a yield of 3% or better in order to live on. Moreover, in addition to the minimum yield threshold, I am also looking for quality, consistency and attractive valuation. Unfortunately, it has become exceedingly difficult to find high quality dividend growth stocks that meet all of those criteria.

Consequently, I am not currently invested in Lowe’s (LOW) because it does not meet my 3% or better dividend threshold, but I am becoming quite interested as a total return option. In addition to investing for income, I also invest for total return for myself and for select clients who are also primarily interested in total return. Lowe’s has attracted my attention as a result of its stock price correcting approximately 10% since the spring of this year. Furthermore, the company offers above-average earnings growth potential. Therefore, I see the company currently fairly priced in relation to both its recent historical growth coupled with its expected future growth.

As a result, I have begun initiating a comprehensive research and due diligence effort on this Dividend Aristocrat as a long-term total return opportunity. The purpose of this article is to share my initial analysis with others who might also be interested. To be clear, I have not yet made a final decision to purchase Lowe’s, however, based on what I’ve seen thus far, I’m leaning in that direction. Nevertheless, I will let the reader decide for themselves whether this is an appropriate option or opportunity.

FAST Graphs Fundamental Preview on Lowe’s

Since a picture’s worth 1000 words, and a video worth many more, I offer the following FAST Graphs fundamental analysis on Lowe’s. In the video I will take a look at Lowe’s valuation relative to several important fundamental metrics. These would include operating earnings, operating cash flow, free cash flow and EBITDA.

Summary and Conclusions

If you’re a long-term investor looking for a company offering above-average growth, fair valuation and a dividend kicker, then Lowe’s Companies Inc. might be worth considering. Personally, I like both Home Depot (HD) and Lowe’s based on their long-term operating success, scale and future growth potential. The only reason I would choose Lowe’s over Home Depot is a slightly more attractive current valuation. Nevertheless, I have begun a more comprehensive research and due diligence endeavor on Lowe’s based on the fundamental metrics I highlighted in the video.

Disclosure: No position at the time of writing.

Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned or to solicit transactions or clients. Past performance of the companies discussed may not continue and the companies may not achieve the earnings growth as predicted. The information in this document is believed to be accurate, but under no circumstances should a person act upon the information contained within. We do not recommend that anyone act upon any investment information without first consulting an investment advisor as to the suitability of such investments for his specific situation.