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Lowe's Dividend Growth: Can Housing Weakness Halt Payouts?
14 Oct
Summary
- Lowe's dividend has doubled since 2021, outpacing peers.
- Housing market slowdown and acquisition debt pressure growth.
- Free cash flow significantly covers dividend payments.
Lowe's has demonstrated a strong commitment to returning capital to shareholders, doubling its quarterly dividend since early 2021 and currently offering a 2.53% yield. The company's next dividend payment of $1.25 per share is scheduled for November 4, 2026. In fiscal year 2025, Lowe's generated approximately $7.65 billion in free cash flow, with dividends accounting for roughly 34% of this amount.
Despite its dividend growth, Lowe's faces challenges from a cooling housing market, with existing home sales at a yearly low and transactions declining. This has led to only a 0.2% rise in comparable sales last quarter. Furthermore, acquisition debt, with net interest expense projected to reach $1.6 billion this year, adds financial pressure. Management aims to reduce adjusted debt to EBITDA from 3.0 times to 2.75 times by mid-2027.
Looking ahead, Lowe's is expected to continue raising its dividend, albeit at a slower pace, likely in the low-to-mid single digits. This moderation is attributed to ongoing debt repayment and soft housing demand. Buybacks have significantly decreased, prioritizing the dividend. The company anticipates third-quarter adjusted EPS to be about 7% lower year-over-year, with free cash flow and debt levels being key indicators for future dividend adjustments.
