This Dividend King Just Raised Its Dividend for the 54th Straight Year

Very few stocks have generated a more consistent dividend for investors than Lowe’s (NYSE:), the home improvement giant.

Lowe’s has raised its dividend each year for the past 54 years in a row, putting it in very elite company, as only roughly 18 other stocks can boast of such a streak. Lowe’s is what’s called a Dividend King, as one of just a few dozen stocks that have increased their dividend for at least 50 straight years.

This week, Lowe’s made it 54 straight years, raising its quarterly dividend by 4% to $1.20 per share, payable on August 6 to shareholders as of July 23.

“We are pleased with the ongoing transformation of the company, despite near-term challenges in the macro environment,” Marvin Ellison, Lowe’s chairman, president and CEO, said. “We’re evolving our Total Home strategy so that we will be well-positioned to capitalize on the expected recovery in home improvement, and we continue to make the right investments in long-term growth.

This dividend increase reflects the Board’s confidence in these investments, and the company’s commitment to delivering sustainable shareholder value through a disciplined capital allocation strategy.”

Lowe’s dividend consistency speaks to its long-term stability as a leader in its space.

A Higher-than-Average Yield

In addition to its consistency, Lowe’s pays out a robust yield of 2.18%, which is higher than the average yield on the .

The yield is the percentage of the share price that the company pays out in dividends, so the higher the yield, the more the payout.

Also, it has a payout ratio of about 36%, which is right in the sweet spot of where you want to be. The payout ratio is the percentage of net earnings that go toward the dividend. A ratio over 50% or 60% probably means too much is being allocated to the dividend at the expense of other investments. A ratio that’s too low, say lower than 20%, might suggest that not enough of its earnings are going back to shareholders.

Dividends are particularly important right now, as stock returns have generally been flat to negative. The dividend can put extra money in an investor’s pocket, or the dividend can be reinvested back into the stock to boost the total return.

To see how the reinvested dividend can help your total return, over the past five years, Lowe’s stock without the reinvested dividend has an average annualized return of 11.6%. With the reinvested dividend it has an average annualized return of 13.3%.

In times of high inflation and market malaise, dividends become even more important. Consider a recent analysis from the Hartford Funds, which found that in the 1970s, a recessionary period of high inflation, dividends contributed 73% to the total return of the S&P 500.

By comparison, dividends only contributed 17% to the total return during the 2010s bull market.

Lowe’s had a difficult Q1 but beat estimates and maintained its guidance. Analysts have a median price target of $263 per share, which suggests 15% growth, and when you add in the dividend, it makes this stable grower even more attractive.

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