Lowe's Home Improvement Warehouse is an American retail chain specializing in construction and gardening equipment for individuals founded in 1946. Lowe's is the second largest hardware chain in the world, behind Home Depot but ahead of European giants B & Q and OBI.The chain now has more than 14 million customers per week in its 1,710 stores in the United States and 20 in Canada. (source Wikipedia)
THEexpansion in Canada began with the opening of a store in Hamilton, Ontario, in early 2008. Lowe's also initiated the construction of two stores in Mexico. In 2011, Lowe's released plans to build more than 150 stores in Australia over the next 5 years, hoping to rival the 46 billion Australian dollars of the industry.
The progression of the LOW price since 1980 is simply incredible: 13,000%. With 10,000 USD invested you would be a millionaire today... The performance of the S&P 500 is almost pitiful in comparison. It is also interesting to see the acyclical nature of the stock. While most stocks collapsed with the bursting of the Internet bubble, LOW continued to rise, reaching its peak in 2006. As early as 2007, a year before the subprime crisis, the stock underwent a significant correction, until 2009.
The stock's P/E ratio is high, at 17.10, but lower than that of the "Retail" sector as a whole. From a historical point of view, the P/E ratio is within the norm. The current dividend yield of 1.80% could also lead one to believe at first glance that the stock is overvalued. However, over the longer term the average yield, with 1.40%, is lower than the current yield. But above all The annual dividend growth rate of 16.68% is particularly impressive., especially since the distribution ratio remains particularly low, at 30.96%. Lowe's therefore still has a lot of room to maneuver to increase its dividend in the future. It should also be noted that the company has been able to increase its distributions for 49 consecutive years, which proves the quality and sustainability of its business model.
Even though LOW's share price is relatively independent of the market, this does not mean that it is less volatile. The goods sold by the company are not essential, unlike retailers active in the food sector, such as Wal-Mart (NYSE:WMT). So, with 22.22% volatility, LOW is one of the most volatile stocks in our portfolio.
Despite this, our analysis model considers that LOW is a purchase opportunity to date. The modest yield and high volatility are more than offset by a strong dividend growth rate, a low payout ratio and an impressive history of successive dividend increases.
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Interesting analysis. The company seems to be very well managed with an impressive dividend history. On the other hand, the P/E remains quite high in my opinion. In addition, if the real estate market continues to decline in the United States, this could impact the company.
It is true that the PER is no longer as interesting as in 2008, but it remains lower than that of its sector. The price to book is also only 1.8. But what is most impressive is the dividend growth at an annual rate of more than 16% (over the last 4 years). If we consider the last five years, we are even at 32% of annual growth. Better still, the company has just announced a dividend increase from 0.11 to 0.14 USD, or 27%. With a payout ratio of 31%, these dividend increases still have room.
And then I also tell myself that the drop in the real estate market does not prevent people from tinkering… quite the contrary 🙂
And what drew you to Lowe's instead of Home Depot? What do you like best about Lowe's?
Home Depot did not raise its dividend from 2007 to 2009. I value dividend growth history as a sign of a solid, long-term business model. I prefer a modest but steady increase to a spike and then nothing or worse, a cut. Dividend payers that grow beat the market over the long term, but those that cut or reduce their payouts underperform. With 49 years of dividend increases, LOW has proven itself to be able to weather financial and economic ups and downs with ease.