Lowe’s Companies Inc. (LOW), one of the world’s largest home improvement retailers, recently raised its quarterly dividend by 22%.
 
The board approved an increase in annual dividend to 44 cents a share (or 11 cents quarterly) from 36 cents a share (or 9 cents quarterly). The dividend will be paid on August 4, 2010, to stockholders of record as on July 21, 2010. Since going public in 1961, the company has paid a dividend every quarter.
 
Lowe’s is actively managing its capital. The company is rationalizing its capital expenditures, including store-remerchandising efforts, to improve its return on investment. As a result, the company expects to generate substantial future cash flows. The company’s strong liquidity will position it to drive future growth.
 
Sustained focus on enhancing customer-shopping experience has kept Lowe’s afloat in the sluggish housing environment. We appreciate its approach of cutting new store growth targets in the current consumer environment. Lowe’s opened 62 stores in fiscal 2009, significantly down from a respective 115 and 149 store openings in 2008 and 2007. The company now expects to open 40 to 45 stores in fiscal 2010.
 
Although the economy is showing signs of revival with improvement in comparable-store sales trends, we believe that spending on big remodeling projects will likely remain under pressure until the housing market stabilizes, inventory levels normalize, and consumer spending rebounds.
 
Lowe’s expects second-quarter 2010 earnings in the range of 57 cents to 59 cents per share, and fiscal year 2010 earnings between $1.37 and $1.47 per share. The current Zacks Consensus Estimate for the second quarter is 61 cents and for fiscal 2010 is $1.46, supported by 25 analysts covering the stock, each showing an improvement of approximately 3% in the last 30 days.
 
Lowe’s shares maintain a Zacks Rank #3, which translates into a short-term ‘Hold’ recommendation. Our long-term recommendation for the stock remains ‘Neutral’. The company currently operates more than 1,700 home improvement stores in the United States, Canada and Mexico.
Read the full analyst report on “LOW”
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