Understanding Home Depot and Lowe’s Dividend Policies
Importance of dividends
Home improvement retailers’ sales, like Home Depot (HD) and Lowe’s (LOW), are very sensitive to the economy’s performance and other macro factors. So, dividends help in smooth out the return volatility.
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Home Depot and Lowe’s have a strong history of returning cash to their shareholders. Lowe’s is a dividend aristocrat. Home Depot paid dividends of $0.89 in 2Q17 at a dividend yield of 2.2% and a payout ratio of 48.6%. For the next two quarters, analysts expect the company to pay dividends of $0.86 in each of the quarters. It takes the total for 2017 to $3.5, which represents 18.2% growth from $2.96 in 2016.
Lowe’s paid dividends of $0.41 in 2Q17 at a dividend yield of 2.1% and a payout ratio of 36.4%. In the next two quarters, analysts expect Lowe’s to pay dividends of $0.88. It takes the total for 2017 to $1.64, which represents 23.3% growth from $1.33 in 2016.
During the same period, Williams-Sonoma (WSM) paid dividends of $0.39 at a dividend yield of 3.1% and a payout ratio of 43.5%. Bed Bath & Beyond (BBBY) paid dividends of $0.15 at a yield of 2.7% and a payout ratio of 20.0%.
Apart from paying dividends, Home Depot and Lowe’s reward shareholders through share repurchases. In the last four quarters, Home Depot repurchased shares worth $8.4 billion, while Lowe’s repurchased shares worth $5.1 billion. By the end of 2Q17, Home Depot had $3.2 billion in its share repurchase program, while Lowe’s had $3.5 billion in its share repurchase program.
In the next part, we’ll discuss Home Depot and Lowe’s valuation multiple.