Home Depot And Lowe's: Fast-Growing Super SWANs Worth Buying Today

Jun. 20, 2019 6:53 AM ETThe Home Depot, Inc. (HD), LOW47 Comments

Summary

  • Companies that can sustain rapid dividend growth for many years or decades are a great way to exponentially grow both your income and wealth.
  • Over the last 33 years Home Depot and Lowe's have minted many a millionaire, and today represent two level 11/11 quality Super SWAN dividend-growth stocks.
  • These companies have great businesses, excellent management, and long-term double-digit earnings and dividend-growth potential.
  • At today's valuations, I can recommend buying both, with HD and LOW being about -2% and 11% undervalued and offering roughly 13% and 19% CAGR long-term total return potential, respectively.
  • Just remember that risk management and proper asset allocation are the most important component of good investing returns. Always own any stock as part of a well diversified portfolio that meets your personal needs.

(Source: imgflip)

Nothing's better than a quality company that is able to compound investor wealth at an incredible rate over decades. Except, perhaps, if these companies also pay safe and fast-rising dividends, which allows you to pay the bills during retirement without having to sell your exponentially appreciating shares. But to recognize such companies isn't always easy, which is why Benjamin Graham, Buffett's mentor, the father of value investing, and one of the greatest investors in history (20% CAGR returns from 1934 to 1956 vs S&P 500's 12%) offered this advice in "The Intelligent Investor"

“One of the most persuasive tests of high-quality is an uninterrupted record of dividend payments going back over many years. We think that a record of continuous dividend payments for the last 20 years or more is an important plus factor in the company’s quality rating.

Well, Home Depot (NYSE:HD) and Lowe's (NYSE:LOW) are two hyper dividend-growth stocks that, as Graham might have predicted, have a great track record of enriching investors over the decades.

Home Depot and Lowe's Total Returns Since 1986

(Source: Portfoliovisualizer) - note portfolio 1 is Home Depot, portfolio 2 is Lowe's

$10,000 invested in either company 33 years ago would have made you a millionaire and in the case of Home Depot, a deca-millionaire (and in the top 0.09% of all Americans by net worth). Of course, past performance is no guarantee of future results, but there are plenty of reasons to believe that both Home Depot and Lowe's will be able to deliver safe and rapidly growing dividends, as well as market-beating total returns for years if not decades to come.

From today's valuations, I consider Home Depot a decent "buy" and Lowe's a "strong buy" because they are approximately fairly valued, and 11% undervalued, respectively. Given their realistic long-term growth prospects, that should allow HD and LOW

This article was written by

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Adam Galas is a co-founder of Wide Moat Research ("WMR"), a subscription-based publisher of financial information, serving over 5,000 investors around the world. WMR has a team of experienced multi-disciplined analysts covering all dividend categories, including REITs, MLPs, BDCs, and traditional C-Corps.


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I'm a proud Army veteran and have seven years of experience as an analyst/investment writer for Dividend Kings, iREIT, The Intelligent Dividend Investor, The Motley Fool, Simply Safe Dividends, Seeking Alpha, and the Adam Mesh Trading Group. I'm proud to be one of the founders of The Dividend Kings, joining forces with Brad Thomas, Chuck Carnevale, and other leading income writers to offer the best premium service on Seeking Alpha's Market Place.


My goal is to help all people learn how to harness the awesome power of dividend growth investing to achieve their financial dreams and enrich their lives.


With 24 years of investing experience, I've learned what works and more importantly, what doesn't, when it comes to building long-term wealth and safe and dependable income streams in all economic and market conditions.


Disclosure: I am/we are long LOW. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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