Home Depot or Lowe’s: Which Dividend Grower Wins for Long-Term Income?
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Home Depot (NYSE:HD | HD Price Prediction) or Lowe’s (NYSE:LOW): which home improvement dividend grower holds up better for retirement-focused income? The question sharpened today when Barron’s downgraded Lowe’s to Sell as it struggles to catch up to Home Depot. Both stocks rallied over the past month, with Home Depot up 18.66% and Lowe’s up 21.07%. Housing is still the problem. Existing home sales fell to 3.75M annualized in October[1], the lowest reading in the past 12 months.
Current Income: Home Depot Pays More Today
Home Depot yields 2.63% against 2.07% for Lowe’s. Its quarterly payout of $2.33 annualizes to $9.32, and February’s declaration marked its 156th consecutive quarterly cash dividend. The company sent out approximately $2.3 billion in dividends[2] in the second quarter alone. Lowe’s pays $1.25 per quarter, a forward annual rate of $5.
From day one, retirees get more income from Home Depot. Winner: Home Depot.
Dividend Growth and Coverage: Lowe’s Has the Stronger Engine
Lowe’s raised its quarterly dividend from $1.20 to $1.25, a 4.2% increase. Home Depot’s latest increase was just 1.3%. Lowe’s management calls the company a dividend aristocrat[3]. Home Depot’s record shows its quarterly payout held at $0.225 from 2007 through 2009, so it lacks that annual-raise streak.
Coverage also favors Lowe’s. Its $5 forward dividend is about 41% of its ~$12.25 adjusted EPS guidance. Home Depot’s $9.32 is about 63% of fiscal 2025 adjusted EPS of $14.69. Lowe’s trades at 19 times earnings and 17 times free cash flow, compared with 25 and 27 for Home Depot. That puts Lowe’s free cash flow yield at 5.99%, against 3.64%.
Lowe’s balance sheet is weaker. Years of buybacks left shareholders’ equity at-$9.92B, and net debt/EBITDA is 3.54 versus 2.56 at Home Depot. Management targets 2.75 times[3] leverage by mid-2027. The cheaper valuation and wider coverage buffer still outweigh the leverage. Winner: Lowe’s.
Housing-Cycle Exposure: Home Depot’s Pro Business Is Holding Up
Home Depot posted 1.7% comparable sales growth in the second quarter. Its Pro sales posted positive comps and outperformed DIY[2], and its SRS distribution arm, now 1,340+ locations, grew comps faster than the company average. Management reaffirmed guidance for adjusted EPS growth of flat to +4.0%.
Lowe’s managed comps of just +0.2%[4]. Gross margin contracted 77 bps to 33.04%[4], and the company narrowed its full-year outlook to the low end: $92.0B in sales with flat comps. It also forecast third-quarter adjusted EPS to be about 7% below[3] the prior year, citing pressure on its FBM and ADG building-materials acquisitions. Chief executive Marvin Ellison summed up the problem: “This consumer is being cautious.”[3] Home Depot’s contractor reach gives it better footing while home sales stay soft. Winner: Home Depot.
Verdict: Home Depot Is the Retirement Income Pick
Home Depot takes two of three categories, and they matter most for retirees: more cash per share today and a business that keeps growing comps through a housing slump. Its 2.63% yield, lower leverage, and reaffirmed guidance make it the steadier income stock of the two. Investors pay up for that steadiness, with a forward P/E of 22.
Lowe’s offers more for longer-horizon income building. It brings faster increases and a cheaper free cash flow multiple, in exchange for more debt and weaker near-term sales.
Next up, Home Depot’s third-quarter report will show whether Pro strength is lasting. Lowe’s report will show whether that guided EPS decline gets worse. Existing home sales staying near 3.75M[1] would favor the company with the stronger contractor business: Home Depot.
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Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
His work has been quoted, or referenced by a number of outlets including Business Insider, USA Today, Yahoo Finance, MSN, The Motley Fool, and many other publications. A graduate of Southwestern University, he studied business with a focus on investments and has previous experience in banking and startups.
When not reading or writing the news, he is following his passion for Lacrosse, playing chess, or building solar projects with his dad.
