The U.S. home improvement sector is under pressure in 2026 as mortgage rates remain high. The average rate on a 30-year fixed mortgage stood at 6.53% in late May, the highest level in nearly nine months, making it more expensive to buy a home during what is usually the busiest part of the year.
That has cooled demand and added pressure across the retail side of the housing market. Even so, the two biggest home improvement stocks are not moving in the same direction. Home Depot’s (HD) stock has fallen 18.4% over the past three months, while the broader S&P 500 Index’s ($SPX) has gained 10.19%, showing that investors have become more careful with the group.
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Lowe’s Companies Inc. (LOW), however, is sending a more confident message. Last week, the Mooresville, North Carolina-based retailer raised its quarterly cash dividend to $1.25 per share from $1.20, a 4.2% increase. The dividend will be paid on Aug. 5 to shareholders on record as of July 22. The increase fits Lowe’s long history of returning cash to shareholders. The company has paid a dividend every quarter since going public in 1961 and has increased it for more than 50 straight years, making it a Dividend King.
Still, with LOW stock down nearly 11% in the past month and trading close to its 12-month low, is this dividend increase just a show of confidence or is it a real sign that Lowe’s business and stock may be ready to recover? Let’s find out.
Breaking Down the Financials
Lowe’s is one of the biggest home improvement retailers in the U.S., serving both DIY customers and professional contractors through its large store base and growing online business.
The stock has been under pressure, down 8% over the past 52 weeks and 13.8% year-to-date.
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Even so, Lowe’s still looks fairly valued. It trades at a forward P/E of 17.43x, a bit above the sector average of 15.70x.
Income is a big part of that appeal. Lowe’s currently yields about 2.24%, or roughly $4.80 a year, with its most recent quarterly dividend at $1.20. The forward payout ratio of 38.7% leaves room for more hikes, and the company has now increased its dividend for 55 straight years. The payout comes quarterly, and the yield sits above the 1.89% average in the consumer discretionary sector.
The latest quarter was solid. Lowe’s posted $23.1 billion in revenue, up 10.3% year-over-year and a touch ahead of estimates, and delivered adjusted EPS of $3.03, up 3.8% after backing out $96 million in acquisition costs tied to Foundation Building Materials and Artisan Design Group. Comparable sales inched up 0.6%, helped by spring demand, 15.5% online growth, and strength in appliances, home services, and pro customers.
Operating margin held at 11.1%, adjusted EBITDA came in at $3.26 billion, and free cash flow margin slipped to 12.3%. Management kept its outlook intact, calling for $92–$94 billion in revenue, flat to 2% comparable sales growth, and adjusted EPS of $12.25–$12.75 for the full year, pointing to steady rather than spectacular growth from here.
Engines of Future Growth
One of Lowe’s biggest growth drivers is its focus on professional customers, and the new AI-powered Material Lists tool is built exactly for them. It takes handwritten notes, photos, spreadsheets, and other files and turns them into quote-ready orders in minutes, in both English and Spanish. That is a big help for pros who spend a lot of time on estimating work that is usually slow and easy to mess up.
The pro push also shows up in how Lowe’s is handling financing. Synchrony Financial (SYF) has expanded its partnership with the retailer and now issues the MyLowe’s Pro Rewards American Express Card, on top of the existing MyLowe’s Pro Rewards Credit Card that only works in Lowe’s stores. The new card works anywhere American Express is accepted, which gives pros more purchasing power outside Lowe’s while still letting them earn rewards on eligible spending.
Lowe’s is also working on its brand reach. Its renewed and expanded partnership with Inter Miami CF makes Lowe’s a main partner, the official jersey sleeve partner across the first team, MLS Next Pro, and academy teams, and a founding partner of Miami Freedom Park.
Analyst Views and Outlook
Lowe’s is set to report its next earnings in August For the current quarter ending in July, Wall Street expects EPS of $4.30, which is just below the $4.33 the company posted a year ago. That would mean a small 0.69% decline. The next quarter looks a bit better, with EPS projected at $3.13 for October, up 2.29% from last year. For the full fiscal year ending in January 2027, analysts expect Lowe’s to earn $12.50 per share, up 1.71% from $12.29.
Analysts still seem fairly comfortable with the stock. Wells Fargo kept its “Overweight” rating on Lowe’s in May, though it lowered its price target to $255.
The broader analyst view is also still positive. All 29 analysts covering Lowe’s currently rate it a consensus “Moderate Buy.” Their average price target is $263.69, which points to about 27% upside from current levels.
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Conclusion
Lowe’s dividend hike looks less like a symbolic move and more like a signal of steady confidence backed by resilient cash flow and improving pro-focused execution. While near-term pressures from housing and consumer spending are still weighing on the stock, the combination of consistent earnings, disciplined capital returns, and clear growth initiatives suggests the foundation remains intact. With analysts pointing to meaningful upside and earnings expected to gradually re-accelerate, the most likely path appears to be a measured recovery rather than a sharp rebound, with shares trending higher as macro conditions stabilize.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
