Renowned billionaire investor Bill Ackman, known for his astute focus on growth and valuation, has a penchant for stocks that exhibit solid growth prospects while also offering dividends. Among his notable holdings is a Dividend King that holds a significant place in his portfolio, with Ackman’s stake nearing $1.5 billion. But should individual investors follow suit and consider purchasing shares of this household name?
Ackman’s favored Dividend King is Lowe’s Companies (NYSE: LOW), a stalwart in the home improvement retail sector. With a dividend track record spanning over 50 consecutive years, Lowe’s holds a unique position as the sole Dividend King within Ackman’s Pershing Square Capital Management portfolio. Despite his limited selection of stocks, Lowe’s stands out as a significant investment choice for Ackman, representing a substantial portion of his holdings.
Having initiated a stake in Lowe’s back in the second quarter of 2018, Ackman’s interest in the company stemmed from a perceived need for enhanced competitiveness against industry rival, The Home Depot. Despite some divestment in 2023, Ackman’s Pershing Square retains a sizable ownership stake in Lowe’s, indicating continued confidence in the company’s long-term prospects.
Investors eyeing Lowe’s may find compelling reasons to consider the stock. Notably, the company’s consistent dividend increases and current dividend yield of nearly 2% present an attractive proposition for income-oriented investors. Additionally, Lowe’s valuation appears favorable, trading at a forward earnings multiple well below the S&P 500 average. Moreover, with improving macroeconomic conditions and sustained demand for home improvement products, Lowe’s growth prospects remain promising.
However, potential investors should weigh certain drawbacks associated with Lowe’s. Despite its Dividend King status, Lowe’s trails behind The Home Depot in market share, posing ongoing competitive challenges. Furthermore, as a cyclical stock, Lowe’s is susceptible to economic downturns, which can result in heightened volatility.
While following famous investors’ footsteps isn’t always advisable, Lowe’s merits consideration for investors seeking income generation and long-term growth potential. Particularly appealing to income investors and those nearing retirement, Lowe’s strong dividend track record coupled with favorable growth prospects position it as a compelling investment opportunity.
Ultimately, investors should conduct thorough research and consider their individual investment objectives before deciding whether to allocate funds to Lowe’s Companies.
Should you invest $1,000 in Lowe’s Companies right now?
