Lowe’s: Can This Dividend King Maintain Its Huge Success?

The Dividend Kings consist of many different types of companies, many of them operating in the non-cyclical consumer staples industry. There aren’t many retailers who have raised their dividend for more than 50 years in a row, but Lowe’s Companies (LOW) has managed to do just that

The home improvement store operator has produced outstanding returns in the past, and thanks to a strong growth rate the outlook is positive as well. Lowe’s is not trading at an expensive valuation, and the dividend will get raised again in a couple of months.

Business Overview

Lowe’s is the second biggest operator of home improvement stores in the US, only Home Depot (HD) is even bigger.

LOW Overview

Source: Lowe’s investor presentation

Lowe’s as well as Home Depot target the $850 billion home improvement market in the US. Lowe’s also operates in Canada, although that side of its operations produces a significantly smaller amount of sales for the company. Lowe’s targets both pro customers as well as do-it-yourself customers. Lowe’s customer base is targeted through a multitude of sales channels:

LOW Channels

Source: Lowe’s investor presentation

The combination of in-store, online and job-site / in-home sales allows Lowe’s to hold a significant market share in the sizeable US home improvement market. The company’s omni-channel approach also provides a strong moat versus pure online retailers such as Amazon (AMZN): Amazon can sell products online as well, but doesn’t have the manpower or the retail space to sell products in store or in-home.

Especially pro customers need the goods they purchase timely, which means that it is not a viable approach for them to order on Amazon: That would mean they would have to wait for days until the products they need for a project would arrive. Many of the goods Lowe’s sells are big / bulky / heavy, which means that they are not easily transported by a delivery service. The combination of these factors makes Lowe’s relatively invulnerable against the Amazon threat: Amazon has a much easier time in gaining market share when it comes to selling cloths, books or CDs than when it comes to selling planks, furniture, etc.