Home Depot vs. Lowe’s: One Dividend Has Room to Double

Home Depot (NYSE: HD | HD Price Prediction) and Lowe’s (NYSE: LOW) closed fiscal 2025 within a day of each other, and their dividend postures diverge more than the headline numbers suggest. Home Depot beat on earnings with a steadier balance sheet. Lowe’s missed, but is leaning harder on acquisitions and shareholder payouts even as equity sits underwater. Both face the same housing macro. Only one looks built to keep raising the dividend without strain.

One Quarter Beats Estimates, the Other Misses on Margin

Home Depot delivered Q4 adjusted EPS of $2.72 against a $2.52 estimate, with revenue of $38.20B down 3.8% on a 13 versus 14 week calendar. Comparable sales rose 0.4%, and Pro demand plus SRS Distribution carried the quarter. CEO Ted Decker called underlying demand “relatively stable” after adjusting for storms.

Lowe’s posted $1.98 in adjusted EPS, missing the $2.07 consensus, even as revenue grew 10.9% to $20.58B on the FBM and ADG deals. Comps came in at +1.3%, online grew 10.5%, and Marvin Ellison handed out $125 million in frontline bonuses. Operating margin compressed to 9.02% from 9.43%, and net income fell 11.1%. Top line is expanding faster than profit can absorb the integration bill.

The Dividend Math Tells Two Different Stories

Home Depot’s quarterly payout climbed to $2.33, the 156th consecutive quarterly dividend. Free cash flow of $12.65B covered the $9.15B payout 1.38x. Coverage has tightened from 2.14x two years ago, so the runway is real but not unlimited.

Lowe’s tells a stranger story. FCF coverage sits at 2.90x on an annual basis, healthier on paper than Home Depot’s. The catch is the balance sheet underneath it. Shareholders’ equity finished Q4 at -$9.92B, buybacks collapsed to $211 million from $4.05B a year earlier, and Q4 FCF coverage alone fell to 0.13x. That is a company funding the payout with the calendar working in its favor.

What the Next Year Hinges On

Home Depot guided FY2026 sales growth of 2.5% to 4.5% and adjusted EPS growth of flat to 4.0%. Lowe’s wants 7% to 9% sales growth with $1.6 billion in net interest expense, courtesy of FBM debt. March housing starts hit 1.502M, the 12 month high, which would help both retailers if remodeling demand follows. I will be watching whether Pro penetration at Lowe’s actually offsets the integration drag, and whether Home Depot’s SRS and GMS bets translate into cash flow recovery.

Why I Lean Toward Home Depot for Dividend Durability

If you want a payout that can keep climbing through a soft housing cycle, Home Depot is the cleaner story. The yield is higher at 2.81%, the equity base is intact, and the dividend has room to grow even with FCF coverage tightening.

Lowe’s offers cheaper multiples and a positive CEO tone, but the negative equity, vanished buybacks, and Q4 cash crunch tell me the dividend is being defended under balance sheet strain. I would consider Lowe’s only as a turnaround vehicle if integration cash flows arrive on schedule. For now, Home Depot fits the profile of a steadier income story better.