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Home Depot Stock vs Lowe鈥檚 Stock | Which is Better? - YouTube
Channel: Dividend Data
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in this video i'm going to analyze both
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home depot and lowe's stock ultimately
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deciding which i think is the better
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investment my name is zach and you
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should leave a like and subscribe to the
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channel if you enjoy the video the
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research tool i'm going to be using is
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my own dividend investing software which
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is available at dividenddata.com
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it allows me to analyze my portfolio
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track my dividend income and conduct
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in-depth research on companies if you
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like what you see then sign up with the
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link in the description home depot and
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lowe's are the duopoly that dominates
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u.s home improvement retailers both
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companies have seen significant earnings
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growth over the last decade and pay fast
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growing dividends in fact lowe's has
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been growing its dividend over 30
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percent in recent increases now i'm
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going to analyze each stock individually
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then look at the key differences and at
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the end of the video explain which stock
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i like better the home depot ticker
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symbol hd was founded in 1978 and now
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operates 2
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316 retail stores in the us and canada
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the current stock price is 308 dollars
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and 46 cents which is down over 25 from
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its 52-week high this values the company
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at 317 billion dollars the p e ratio
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based on earnings over the trailing 12
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months is 19.57
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since 2011 the stock price has grown
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significantly in line with their strong
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earnings growth the non-gaap earnings
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per share has grown at a high rate home
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depot's revenue has been growing at a 12
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10-year compound annual growth rate its
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net income is growing at an even higher
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rate the 10-year keger is 20
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home depot is a free cash flow
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generating machine it's grown at a 14 5
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year keger in the past fiscal year the
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company generated 13 and 4 cents of free
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cash flow per share they use this money
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to reward their shareholders home depot
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has a fast growing dividend and massive
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share buybacks over the past 20 years
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the company has been repurchasing shares
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this increases the relative value of
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each share you own meaning your
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ownership of the company's earnings
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increases sure buybacks is one of the
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best ways companies reward shareholders
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on top of this home depot has been
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growing its dividend on an annual basis
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for over 13 consecutive years its
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five-year compound annual growth rate is
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16.2 percent they recently had a 15.15
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increase currently it pays 1.90
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per share every quarter the annualized
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dividend is 7.60
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which at current prices results in a
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2.46
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dividend yield the payout ratio has
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recently hovered between 42 to 53
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this means the company has room to
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continue growing the dividend but is
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reliant on future earnings growth to
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keep up these high increases it should
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be noted that home depot has a large
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amount of debt giving the company
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negative shareholder equity luckily this
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debt is well covered by earnings but
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could lead to less generous dividends
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and buybacks if growth does not continue
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lowe's ticker symbol low was founded in
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1921 and now operates 1971
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home improvement and hardware stores in
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the united states and canada the current
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stock price is 199.63
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which is down over 25 percent from its
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52-week high this values the company at
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130 billion dollars the p e ratio based
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on earnings over the trailing 12 months
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is
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16.21 similar to home depot the company
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has seen rapid earnings growth over the
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last decade annual revenue per share is
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138 dollars and 29 cents growing at a 13
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10 year keger net income per share has
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grown at a 23 10 year cager free cash
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flow per share has grown at a 20
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10 year cager in the last fiscal year
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the company generated 11.87
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of free cash flow per share similar to
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home depot this fuels massive dividend
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growth and share repurchases since 2005
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lowes has been buying back shares at an
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even higher rate than home depot this
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ranges between 3 to 10 percent every
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year which is crazy impressive the
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company's dividend is growing at an 18
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10-year keger their last dividend
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increase was
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33.3 percent which is amazing growth on
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top of this lowe's just announced
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another
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31.25 dividend increase the quarterly
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dividend payout will now be dollar and
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five cents giving the company an
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annualized dividend of four dollars and
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twenty cents at current prices the four
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dividend yield is two point one percent
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lowe's has a very low payout ratio of 23
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to 37 percent in recent years given
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their fast growing earnings that is why
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lows can continually reward shareholders
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with huge dividend increases and
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buybacks similar to home depot the
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company has large amounts of debt and
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negative shareholder equity it is well
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covered by earnings but if growth slows
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then the dividends and buybacks would
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need to slow down in the recent quarter
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both home depot and lowe's performed
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better than most retailers this bucked
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the trend of walmart and target which
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posted bad financials home depot
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mentioned in their earnings call that
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they are continuing to see high spending
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on the home the company stated that due
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to increased real estate values
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consumers are more willing to invest in
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their home however this represents a
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core risk in their business as well if
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housing prices decline significantly
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spending on the home could decrease as
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well this is shown in both home depot
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and lowe's earnings history during 2008
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to 2011 their earnings saw a sizable
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decline after the housing market
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implosion leading to a decline in their
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stock price as well on the bright side
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both companies sustained their dividend
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during this time with lows continuing
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small increases given the recent stock
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market correction and interest rate
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hikes many investors are wondering if
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home prices will see a similar decline
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this could lead to decreased consumer
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spending on the home if this happens i
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would definitely look to buy the dip on
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both home depot and lowe's however it's
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unclear whether this will happen as real
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estate is the supply and demand driven
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market construction of new homes would
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also bring business for these home
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improvement retailers home depot and
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lowe's are very similar companies so
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what are the key differences home depot
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has more of a professional customer base
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with over 45 of their business coming
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from contractors the company has a long
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history with housing professionals and
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offering bulk commercial services this
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is a key advantage for home depot the
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company not only has more stores than
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lows but has greater revenue and profits
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per store lowe's customer base is more
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of the average homeowner with eighty
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percent of their business being
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do-it-yourself buyers this leads to
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slight differences in the services
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products and marketing that said lowes
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is also focused on gaining market share
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with professionals so this could change
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moving forward in conclusion both home
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depot and lowe's are great long-term
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dividend growth stocks of the two i find
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lows to be the better value in today's
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market their earnings are growing at the
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same rate while trading at a lower p e
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ratio also the lower dividend payout
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ratio means they can grow their dividend
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and buy back shares at a higher rate
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than home depot i expect lowes will
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continue to pay a reliable fast growing
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dividend making it a great addition to
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your long-term dividend stock portfolio
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this is just my opinion and be sure to
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do your own research before making any
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investment decisions thank you for
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watching dividend data you can sign up
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for dividenddata.com to use my software
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and join a discord community of
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like-minded investors if you follow me
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can get real-time updates of my buys and
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dividends coming in link in the
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description please leave a comment below
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and thank you for watching
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