Will Lowe's Raise Its Dividend in 2020?

The home-improvement industry has become an important part of the retail sector, and Lowe's (LOW -0.14%) has played a vital role in its resurgence following the housing crisis more than a decade ago. Even though many investors tend to see it as being squarely in the shadow of its main rival in home improvement, Lowe's has done an excellent job of growing its business over time and remains a vital player in the industry.

Lowe's also tops its archrival in one respect: It has a much longer history of delivering rising dividend payouts to its shareholders. Yet as some fear that a downturn in housing might come at some point in the future, dividend investors want to know what to expect from Lowe's in 2020. Below, we'll look at the question in more detail.

Dividend stats on Lowe's

Data source: Yahoo! Finance. Last increase refers to ex-dividend date.

Decades of dividend growth

Lowe's stands out among the top dividend stocks in the market. With well over half a century of payout increases, the home-improvement retailer crushes its immediate competition and doesn't have many peers that can boast similar track records.

Lowe's has generally been consistent with the pace of its growth. The company's dividend doubled between 1985 and 1993 and then doubled again by 2001. Lowe's was able to boost its payouts even faster during the boom times of the mid-2000s.

When housing slowed down and the financial crisis hit, Lowe's pumped the brakes on its past pace of dividend growth, but it still delivered modest annual payout increases. Then, when the U.S. economy recovered, Lowe's returned its attention to dividend growth, and hikes in the past decade have often been in a range of 15% to 30% per year. The most recent boost of $0.07 per share brought the quarterly payout to $0.55 per share.

LOW dividend data by YCharts.

Lowe's fundamental business has performed well enough for the stock to climb significantly as well. As a result, despite its best efforts to grow its dividend, Lowe's still has a dividend yield below 2%.

What's ahead for Lowe's?

Lowe's has high hopes to catch up with its main competitor and promote growth. Efforts to shut down stores that aren't performing as well as they should have led Lowe's to pay close attention to its Canadian operations, with efforts to stop comparable sales from falling.

Image source: Lowe's.

In the stronger U.S. market, Lowe's has worked to sustain a measured pace of expansion while pursuing the opportunities of building out its e-commerce channel to appeal to online customers. Lowe's also sees potential in serving more professional contractors, supplementing the business it gets from do-it-yourself homeowners.

Will Lowe's raise its dividend in 2020?

Lowe's upgraded its guidance for full-year earnings in its most recent quarterly report, and the company now foresees bottom-line growth that could exceed 10%. Lowe's payout ratio has crept upward to some extent, but if it made its third straight boost of $0.07 to bring the new dividend to $0.62 per share each quarter, it would still keep the total annual payout well below anticipated earnings. That margin of safety could be welcome, given concerns about future macroeconomic conditions.

Lowe's will do everything it can not to jeopardize its long dividend streak, and its past timing in hiking during the summer is likely to remain in place. If something happens to the housing market or the broader economy, though, then a smaller increase could be in the works -- and that would be a signal investors would want to consider closely.