5 Dividend Stocks to Buy According to Richard Hamm’s Bristol Gate Capital

3. Lowe’s Companies, Inc. (NYSE:LOW)

Number of Hedge Fund Holders: 65
Dividend Yield as of May 27: 1.64%
Bristol Gate Capital’s Stake Value: $78,539,000

Lowe’s Companies, Inc. (NYSE:LOW), an American retail company, announced a 20% year-over-year growth in its pro customer sales in Q1 2022. The company’s total sales also jumped to $99 billion from $97 billion recorded during the same period last year. In view of this, in May, Truist set a $237 price target on Lowe’s Companies, Inc. (NYSE:LOW), with a Buy rating on the shares.

As per Insider Monkey’s Q1 2022 database, 65 hedge funds reported owning stakes in Lowe’s Companies, Inc. (NYSE:LOW), down from 72 in the previous quarter. The total value of these stakes is over $5.5 billion.

In March, Lowe’s Companies, Inc. (NYSE:LOW) announced a quarterly dividend of $0.80 per share, in line with its previous dividend. The company has been raising its dividends consecutively for the past 25 years and has paid dividends since 1961. As of the close of May 27, the stock’s dividend yield stood at 1.64%.

Bristol Gate opened a new position in Lowe’s Companies, Inc. (NYSE:LOW) during Q1 2022, buying 388,442 shares worth over $78.5 million. The company represented 3.84% of the hedge fund’s 13F portfolio.

Pershing Square Capital Management mentioned Lowe’s Companies, Inc. (NYSE:LOW) in its Q4 2021 investor letter. Here is what the firm has to say:

“Lowe’s is a high-quality business with significant long-term earnings growth potential

Supportive macroeconomic backdrop

 -Aging housing stock, lack of new inventory, robust home equity values, and unprecedented pro project backlog
-COVID-19 causing millennials to enter the housing market

Positioned to grow EPS largely independent of market conditions

-Idiosyncratic revenue opportunities driving share gains
-Self-help initiatives catalyzing operating margin expansion
-Buybacks representing ~8% of current market capitalization planned for 2022

Multi-year business transformation with substantial earnings upside

-Margin target of 13% has substantial upside; Home Depot at ~15.3% and increasing
-Potential to generate high-teens EPS growth over the next several years.

Lowe’s continues to trade at a significantly discounted P/E multiple relative to Home Depot despite materially higher prospective EPS growth. LOW’s share price including dividends increased 63% in 2021 and has decreased 10% year-to-date in 2022.”