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Lowe's (LOW) is Committed Toward Boosting Shareholders' Wealth

Zacks Equity Research
·4-min read

Lowe’s Companies, Inc. LOW strong business growth momentum coupled with efficient operating strategies have helped strengthening the company’s base. This, in turn, has been helping the company boost shareholders’ wealth through regular dividend payouts and share-repurchasing activities. Recently, this well-known home improvements products retailer announced its intentions to raise its quarterly dividend.

The company hiked its quarterly dividend rate by 33% to 80 cents per share from 60 cents. The raised dividend is payable on Aug 4, 2021, to shareholders of record as on Jul 21, 2021. Management highlighted that sturdy cash flow and business growth trajectory acted as the motivating factors for the company to raise its dividend payment structure.

During the fiscal first quarter, the company paid out dividends worth $440 million. Lowe’s looks well placed on the dividend-payout front. Notably, the company has a dividend payout of 23.4%, dividend yield of 1.2% and free cash flow yield of 6.6%.

Apart from this, the company also bought back 16.8 million shares worth $3.1 billion during the first quarter. Lowe’s is planning share buybacks of $9 billion in fiscal 2021. The company has approximately $17 billion worth shares remaining under its repurchase authorization. Share repurchasing actions are a prudent way of maximizing shareholders’ wealth, thereby generating more value.

Speaking of the company’s cash position, Lowe’s ended fiscal first quarter with cash and cash equivalents of $6,692 million. Cash flow from operations amounted to $4,492 million as of Apr 30, 2021, while free cash flow amounted to $4 billion.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

A strong financial position backed by robust cash flows over the years has enabled Lowe’s to support growth initiatives and capital allocation. We note that capital expenditures totaled $461 million in the first quarter as the company continued to invest in its strategic initiatives to drive the business. The company plans to undertake capital expenditures of $2 billion for fiscal 2021. We note that Lowe’s has been investing toward enhancing its omni-channel retailing capabilities to resonate well with customers’ demand. In this context, the company completed the installation of Buy Online Pickup in Store touchless lockers across stores. Going ahead, management believes that its online business model has tremendous potential to grow, backed by an efficient technology team and superior cloud-based platform.

Additionally, Lowe’s is gaining traction with its Total Home strategy that includes providing complete solutions for various types of home repair and improvement needs. The strategy is an extension of the company’s retail-fundamentals approach. Additionally, the company has been striving to boost product offerings across categories. Well, such upsides have continued to keep the company well positioned to capitalize on rising demand in the home improvement market.

Shares of this Zacks Rank #3 (Hold) company have increased 20.4% in the past three months compared with the industry’s rise of 17.4%.

3 Picks You Can’t Miss Out On

Target Corporation TGT flaunting a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 13.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Home Depot, Inc. HD holding a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 11.4%.

Lumber Liquidators Holdings, Inc LL has a long-term earnings growth rate of 22.5% and currently carries a Zacks Rank #2.

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