uploads/2017/10/LOW-S-EPS-1.png

How Lowe’s Dividend Yield Is Trending

By

Updated

Lowe’s Companies’ net sales and EPS growth

Lowe’s Companies (LOW) noted 5.3% and 5% net sales growth in 2015 and 2016, respectively. Comparable sales strengthened in 2015 before falling in 2016. Gross margin expanded 5% in 2015 and 9% in 2016, offset by an increase in the cost of sales. Operating income rose 4% and 18%, respectively, in 2015 and 2016 offset by an increase in SG&A. As a result, the company’s EPS rose around 1% and 27% in 2015 and 2016, respectively. This was offset by an increase in interest expense. Share buybacks enhanced the EPS numbers.

Article continues below advertisement

Net sales rose 9% in 1H17 as comparable sales gained momentum in 2H17. Gross margin expanded 7.3% offset by the cost of sales. Operating income rose 8.3% offset by an increase in SG&A. The company’s EPS rose 4%, enhanced by lower interest expense and offset by a debt extinguishment loss in 1H17. Share buybacks enhanced the EPS numbers.

Lowe’s Companies’ dividend yield

The dividend yield has risen slowly due to dividend growth offset by price gains. The price has risen 16% compared to the 2014 level. The company has maintained a good free cash flow balance.

Lowe’s Companies has a dividend yield of 2.1% and a YTD price gain of 12.5%. Let’s compare that with the broad indexes. The Dow Jones Industrial Average (DJIA-INDEX) (DIA) has recorded a dividend yield of 2.3% and price gains of 18% on a YTD basis. The S&P 500 (SPX-INDEX) (SPY) has recorded a dividend yield of 2.3% and price gains of 15% on a YTD basis. The NASDAQ Composite (COMP-INDEX) (ONEQ) has recorded price gains of 23.2% on a YTD basis.

The SPDR S&P Dividend ETF (SDY) is a dividend ETF with exposure to Lowe’s Companies. It has a dividend yield of 2.4% and a PE of 20x. The iShares Core Dividend Growth ETF (DGRO) is a dividend ETF with exposure to Lowe’s Companies. It has a dividend yield of 2% and a PE of 20.6x.

Advertisement

More From Market Realist