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2 Home Improvement Stocks for Dividend-Loving Investors

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The home improvement industry has been keeping up well in a tough macro environment, as the inflation-ridden economy has kept a check on home buying activities. Rising mortgage and interest rates, surging new home prices and increased construction costs have directed millennial spending toward home improvement activities and renovations. Revamping interiors and exteriors, do-it-yourself (DIY) projects for decorating and maintaining furniture and fixtures, and hiring professionals for enjoyable and comfortable home upgrades have been common lately.

In the coming days, home improvement companies are poised to benefit from investments in the expansion of digital and omni-channel capabilities to meet demand, the execution of growth strategies, and acquisitions. These, along with rapid urbanization and favorable trends in the housing market, are likely to result in sustained consumer demand. Meanwhile, the home improvement industry is not immune to inflationary pressure across product categories and higher transportation costs.

While the home improvement industry is an attractive investment place, dividend-paying stocks further enhance the rewards for investors, making it a lucrative investment idea. Dividend-paying stocks are non-cyclical, i.e., their performances are not linked to the larger economy. The companies consistently raise dividend payouts, reflecting their confidence in their earnings growth potential.

With the help of the Zacks Stock Screener, we have selected two stocks in the Zacks Building Products – Retail industry that have a Zacks Rank #3 (Hold) and a dividend yield of more than or equal to 2%. The stocks also have a five-year dividend growth history and a payout ratio of less than 60, reflecting enough room for future dividend increases.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The above-mentioned combination is compelling for investors interested in long-term income based on stability amid volatility.

Our Choices

Stocks like Home Depot, Inc. (HD - Free Report) and Lowe’s Companies (LOW - Free Report) , which regularly boost dividend payouts, not only offer investors the opportunity to gain from the industry’s growth prospects but also provide insulation against the tough macro-environment.

Home Depot: The Atlanta, GA-based company is the world’s largest home improvement specialty retailer based on net sales. HD has been benefiting from strong demand for home improvement projects, robust housing market trends and ongoing investments. Continued strength in the Pro and DIY categories, and digital momentum have been the key drivers. Its interconnected retail strategy and underlying technology infrastructure have helped boost web traffic for the past few quarters, aiding digital sales.

Home Depot has an estimated long-term earnings growth rate of 11.2%. The company pays out a quarterly dividend of $1.90 ($7.60 annualized) per share, giving a 2.77% yield at the current stock price. HD’s payout ratio is 47, with a five-year dividend growth rate of 17.02%. (Check HD’s dividend history here)

The Home Depot, Inc. Dividend (TTM)


The Home Depot, Inc. Dividend (TTM)

The Home Depot, Inc. dividend-ttm | The Home Depot, Inc. Quote

Lowe’s Companies: The Mooresville, NC-based leading home improvements retailer has been gaining from strong growth in its Pro business. LOW also remains well-positioned to capitalize on the demand for the home improvement market, backed by investments in the technology and merchandise category. Gains from the Total Home strategy and the execution of the Perpetual Productivity Improvement initiative are likely to drive the company’s results in the near and long terms. The Total Home strategy has been resonating well with the Pro and DIY customers for a while.

Lowe’s has an estimated long-term earnings growth rate of 13.1%. The company pays out a quarterly dividend of $1.05 ($4.20 annualized) per share, giving a 2.2% yield at the current stock price. LOW’s payout ratio is 33, with a five-year dividend growth rate of 16.05%. (Check LOW’s dividend history here)

In-Depth Zacks Research for the Tickers Above

One ticker, your choice, absolutely free ($25 value):

Lowe's Companies, Inc. (LOW) - free report >>

The Home Depot, Inc. (HD) - free report >>

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