We recently published a list of the 10 Best S&P 500 Stocks to Buy for Dividend Growth. In this article, we are going to take a look at where Lowe’s Companies, Inc. (NYSE:LOW) stands against other best S&P 500 stocks for dividend growth.
Dividend stocks have been attracting increasing interest lately, particularly following the tech sector’s sharp decline in March. While technology companies have been gaining excessive popularity in recent years, the market correction served as a reminder that rapid gains can quickly be erased. In contrast, dividend-paying stocks embody the principle of steady, consistent growth. Although they may not generate the same level of excitement, they tend to offer long-term benefits, especially for investors seeking a reliable source of income.
Bryan Armour, Morningstar’s director of passive strategies, noted that the recent market volatility offers a chance to refocus on fundamental principles. Here are some comments from the analyst:
“With US stocks as a percentage of portfolios at one of the highest levels ever, this is an excellent time for a more diversified portfolio. That’s not to say to sell US stocks, but to diversify into bonds and international stock exposure. We don’t know what’s going to happen, so don’t try to guess. Just hold a diversified portfolio and live to fight another day. Be boring.”
Armour further suggested that investors looking for a safer option might consider exchange-traded funds that invest in companies with a track record of increasing their dividends.
A report by BNY Investments also suggested that with inflationary pressures and market volatility expected to persist into 2025, a dividend-focused strategy could be beneficial. Dividends were highlighted as a potential hedge against inflation while also providing a more stable income stream, making them a crucial element in navigating uncertain market conditions. The report further noted that the opportunity set within the broader market had expanded, as more high-growth sectors—particularly information technology, health care, and industrials—had increasingly embraced dividend payments. As of September 2024, approximately 80% of companies in the wider market were paying dividends, with the technology sector accounting for 24% of those, a notable rise from 13% a decade earlier. This trend underscored the idea that growth and income generation could coexist.
When it comes to dividend investing, stocks with consistent dividend growth are the top choice among investors. A Morningstar report indicates that over the past five years, these stocks have outperformed those offering higher yields in the equity market. The BNY Investments report highlighted that companies that pay and consistently increase dividends tend to demonstrate greater resilience during market downturns, as investors often turn to them for stability in uncertain conditions. These companies also have the capacity to raise dividend payouts in line with or even above inflation, making them particularly attractive to income-focused investors.
In an environment of low interest rates, where bond yields offer limited appeal, dividend-paying stocks have the potential to become even more compelling. With inflation remaining above pre-pandemic levels and possibly rising further, these stocks can serve as an effective hedge, adding to their attractiveness. The report further emphasized that dividends continue to play a crucial role in managing market volatility while providing a steady income stream and protection against inflation. Given this, we will take a look at some of the best dividend stocks with dividend growth.
10 Best S&P 500 Stocks to Buy for Dividend Growth
A family excitedly browsing through the aisles of a home improvement retail store.
Our Methodology
For this article, we looked at dividend stocks in the broader market that have maintained consistent dividend payouts over time. From that list, we chose companies that have increased their dividends by an average of more than 10% annually over the last 5 years. The stocks are ranked in ascending order of their annual average dividend growth in the past five years.
At Insider Monkey, we are obsessed with hedge funds. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Lowe’s Companies, Inc. (NYSE:LOW) ranks third on our list of the best dividend stocks for dividend growth. The North Carolina-based home improvement company operates more than 1,700 locations across the United States. Through its Total Home strategy, the company seeks to meet a wide range of customer needs by providing extensive services tailored to both DIY shoppers and professional contractors.
In recent efforts to strengthen its market position, Lowe’s Companies, Inc. (NYSE:LOW) has focused on several strategic priorities. These include expanding its digital footprint, optimizing supply chain efficiency, and enhancing customer engagement through technological improvements. By emphasizing an omnichannel approach that blends online and in-store experiences, the company aims to maintain profitability while offering a seamless shopping experience.
In the fourth quarter of 2024, Lowe’s Companies, Inc. (NYSE:LOW) reported revenue of $18.55 billion, marking a slight year-over-year decline of 0.2%. Comparable sales edged up by 0.2%, driven by strong performance in the Pro and online segments, a successful holiday season, and rebuilding efforts following hurricane damage. However, discretionary spending pressures in the DIY segment partially offset these gains.
Lowe’s Companies, Inc. (NYSE:LOW) maintained a strong cash position, closing the quarter with nearly $1.8 billion in cash and equivalents—an increase from $921 million the previous year. For FY24, the operating cash flow rose to $9.7 billion, up from $8.1 billion a year earlier. Throughout the year, Lowe’s returned $6.5 billion to shareholders through dividends and share buybacks. The company has consistently increased its dividend payouts for 59 consecutive years. Currently, it offers a quarterly dividend of $1.15 per share and has a dividend yield of 1.98%, as of March 26.
Overall, LOW ranks 3rd on our list of the best dividend stocks for dividend growth. While we acknowledge the potential of LOW as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued dividend stock that is more promising than LOW but that trades at 10 times its earnings and grows its earnings at double digit rates annually, check out our report about the dirt cheap dividend stock.
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Disclosure: None. This article is originally published at Insider Monkey.
