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

Introduction

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.

(Video length 00:08:09)

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.