Lowe's edges out Home Depot as the safer income hold, with a 6.93% FCF yield covering its 2.39% dividend yield by a far wider margin. Home Depot's Pro contractor pivot drove 1.7% comp sales growth versus Lowe's 0.2%, but its free cash flow still shrank 22% and its payout ratio sits higher. Lowe's steady raises from $1.05 to $1.25 quarterly signal a longer dividend growth runway than Home Depot's token 1.3% bump to $2.33.
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For an income investor weighing Home Depot (NYSE:HD) against Lowe's (NYSE:LOW), the real question is which dividend holds up better when the housing market stays frozen. Existing home sales sit at 3.98M annualized, the lowest reading in the trailing twelve-month history and inside what the series classifies as the soft range associated with high mortgage rates. Home Depot's CFO said housing turnover has "never been lower as a percentage of the housing stock".
When people stop moving, they stop renovating. That is the identical headwind facing both payouts, and it sharpens the question of which one is actually safer. Home Depot generates a free cash flow yield of 4.11% against a dividend yield of 2.97%.
Full-year free cash flow was $12.65B, down 22.5% from the prior period. The annualized dividend commitment sits at $9.32 per share against adjusted diluted EPS guidance of flat to +4.0% off $14.69. Covered, but the cushion has thinned as free cash flow shrank. 24/7 Wall St has helped investors make money for over two decades, and our top analysts just finished ranking the definitive Top 10 Stocks To Buy Now.
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