Lowe's Companies (NYSE:LOW) Will Pay A Larger Dividend Than Last Year At $1.10

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

View our latest analysis for Lowe's Companies

Lowe's Companies' Earnings Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. 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 60.5%. If the dividend continues on this path, the payout ratio could be 29% by next year, which we think can be pretty sustainable going forward.

Lowe's Companies Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was $0.64 in 2013, and the most recent fiscal year payment was $4.40. This implies that the company grew its distributions at a yearly rate of about 21% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

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 19% a year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

We Really Like Lowe's Companies' Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for Lowe's Companies (of which 1 is a bit concerning!) you should know about. Is Lowe's Companies not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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