Lowe's Companies (NYSE:LOW) Is Paying Out A Larger Dividend Than Last Year

Lowe's Companies, Inc. (NYSE:LOW) has announced that it will be increasing its periodic dividend on the 9th of August to $1.10, which will be 4.8% higher than last year's comparable payment amount of $1.05. This takes the annual payment to 2.0% of the current stock price, which is about average for the industry.

Check out our latest analysis for Lowe's Companies

Lowe's Companies' Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. The last dividend was quite easily covered by Lowe's Companies' earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand by 60.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 29%, which is in the range that makes us comfortable with the sustainability of the dividend.

Lowe's Companies Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the dividend has gone from $0.64 total annually to $4.20. This implies that the company grew its distributions at a yearly rate of about 21% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Lowe's Companies has been growing its earnings per share at 18% a year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

Lowe's Companies Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 3 warning signs for Lowe's Companies (1 doesn't sit too well with us!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.