Lowe's Dividend Signal: A Strategic Buy for Income and Growth Investors

Lowe’s Companies, Inc. (LOW) has long been a cornerstone of the dividend growth investor’s portfolio, and its 2025 performance reinforces its status as a strategic buy for both income and growth-oriented investors. With a 5-year dividend growth rate of 18.60% and a 10-year average of 18.50% [1], Lowe’s has demonstrated a rare blend of consistency and ambition. This trajectory, coupled with a 61-year streak of consecutive dividend increases [2], underscores a corporate culture that prioritizes shareholder trust through tangible rewards.

The Dividend Growth Engine

Lowe’s dividend growth is not merely a function of short-term gains but a reflection of disciplined capital allocation. The company’s payout ratio of 38.4% [3]—significantly lower than the sector average—provides a buffer against economic volatility. For context, Home Depot (HD), its primary competitor, maintains a higher payout ratio and a P/E ratio of 27.13 compared to Lowe’s 21.17 [4]. This valuation gap, combined with Lowe’s aggressive share repurchase program (2.4% buyback yield vs. Home Depot’s less than 1%) [5], positions it as a more attractive option for investors seeking both income and capital appreciation.

The recent acquisition of Foundation Building Materials (FBM) for $8.8 billion [6] further strengthens this narrative. By expanding into the $250 billion professional construction market, Lowe’s is diversifying its revenue streams and enhancing its Total Home strategy. This move, alongside the 2024 acquisition of Artisan Design Group, signals a commitment to long-term growth that supports sustainable dividend increases.

Debt and Sustainability: A Calculated Risk

Critics may point to Lowe’s elevated debt levels, including a net debt of $37.92 billion and a debt-to-EBITDA ratio of 3.04x [7]. However, the company has made measurable progress in reducing leverage, with a 17% decline in its equity deficit by Q2 2025 [8]. Analysts project that earnings per share (EPS) growth of 24.9% over the next year will further reduce the payout ratio to 35% [9], ensuring the dividend remains well-covered even in a high-interest-rate environment.

The Trust Factor

Lowe’s 61-year dividend growth streak [10] is a testament to its operational resilience. During the 2025 fiscal second quarter, the company exceeded earnings expectations and raised its full-year sales forecast to $84.5–$85.5 billion [11]. This performance, paired with a forward P/E of 19.1 [12], suggests the market is pricing in continued growth. For income investors, the 2.11% yield [13]—while modest—offers a stable base in a low-yield environment, while growth investors benefit from a company reinvesting in high-margin segments like professional services.

Conclusion

Lowe’s dividend growth is more than a number—it is a signal of financial discipline, strategic foresight, and shareholder-centric governance. While its debt levels warrant cautious optimism, the company’s ability to generate free cash flow ($7.7 billion in 2025 [14]) and its aggressive capital return policies make it a compelling case for long-term investors. In an era of economic uncertainty, Lowe’s blend of income security and growth potential is rare and valuable.

Source:
[1] LOW (Lowe's) 5-Year Dividend Growth Rate, [https://www.gurufocus.com/term/dividend-growth-5y/LOW]
[2] Dividend Date & History for LOWES COMPANIES INC, [https://www.dividend.com/stocks/consumer-discretionary/retail-discretionary/home-products-stores/low-lowes/]
[3] Lowes Companies stock dividend history, payout ratio & ..., [https://fullratio.com/stocks/nyse-low/dividend]
[4] Lowes Companies PE ratio, current and historical analysis, [https://fullratio.com/stocks/nyse-low/pe-ratio]
[5] How the Trade War is Reshaping the Global Economy, [https://www.nasdaq.com/articles/home-depot-vs-lowes-which-diy-giant-wins]
[6] Lowe's Announces Agreement to Acquire Foundation Building Materials, [https://corporate.lowes.com/newsroom/press-releases/lowes-announces-agreement-acquire-foundation-building-materials-leading-north-american-distributor-interior-building-products-08-20-25]
[7] Lowe's Financial and Strategic Update 2025, [https://monexa.ai/blog/lowe-s-companies-inc-latest-financial-and-strategi-LOW-2025-07-28]
[8] Lowe's Builds Value for Investors: Still a Good Buy in 2025, [https://finviz.com/news/145787/lowes-builds-value-for-investors-still-a-good-buy-in-2025]
[9] Lowe's Companies (NYSE:LOW) Is Increasing Its Dividend To ..., [https://finance.yahoo.com/news/lowes-companies-nyse-low-increasing-105250974.html]
[10] Lowe's - 38 Year Dividend History, [https://www.macrotrends.net/stocks/charts/LOW/lowes/dividend-yield-history]
[11] Lowe's Q2 Sales Rise FBM Deal Announced, [https://www.nasdaq.com/articles/lowes-q2-sales-rise-fbm-deal-announced]
[12] Home Depot vs. Lowe's: Which DIY Giant Wins?, [https://www.nasdaq.com/articles/home-depot-vs-lowes-which-diy-giant-wins]
[13] Lowe's - 38 Year Dividend History, [https://www.macrotrends.net/stocks/charts/LOW/lowes/dividend-yield-history]
[14] Lowe's Financial and Strategic Update 2025, [https://monexa.ai/blog/lowe-s-companies-inc-latest-financial-and-strategi-LOW-2025-07-28]