Hi all,
Here’s another new entry into the valuation series.
Remember to do your own due diligence and make sure the stock fits your risk tolerance and asset allocation.
Today’s stock is Lowe’s Companies, Inc – ticker symbol LOW.
Lowe’s is one of the largest home improvement retailers in the world.
They have more than 2200 stores in the U.S. and Canada.
www.corporate.Lowes.com
Some metrics I look for –
Current Ratio (look for a number higher than 1, higher the better) – 1.2
Debt to Equity (lower the better) – 0
Payout Ratio – 24.20%
Estimated Earnings Growth Rate – 5 year – 17.70%
Dividend history:
Years of dividend increases: 59! Dividend King!
Dividend growth rate – 5 year – 17.32%
Current yield: 1.37%
Valuation:
DCF model: $300.33
P/E Mean Reversion: $192.74
Dividend Yield Theory: $190.48
Average of the three valuations – $227.74
Current price: $232.55 (11/10/21)
Potential premium/discount – 2.11% overvalued
Analyst’s 1-year estimate: $232.35
Commentary:
Lowe’s just announced a huge 33% dividend increase, which shows the growth potential of this company and management’s commitment to the dividend. The yield is low but the growth, if sustained, will reward long term shareholders.
You can’t complain about their dividend history of 57 years of consecutive increases, it takes an extremely stable company to pull that off.
Their larger competitor, Home Depot, has a higher dividend but shorter increase history.
One of the great things about the industry they are in is that it is relatively “Amazon-proof”, as most sales like lumber and building supplies wouldn’t be bought online. That said, they have been building out their online store and have seen some traction there. They are also renewing their focus on “Pro” customers, as they have higher ticket sales and repeat business.
I like Lowe’s as an investment, they are in a growing business and are one of the leaders in the space. I personally like shopping at Home Depot more even though they are both very close to me. The low yield may not appeal to everyone but the growth would benefit long timeframe investors. In addition to the growing payout, their stock has returned 235% in the past 5 years so there is definitely plenty of growth here. The stock looks fully valued at this time to me.
Disclosure: I do not own LOW but do own HD.
Let me know what you think!
Jeremy