We recently published a list of the 15 Best Dividend Stocks to Buy for Long-Term Passive Income. In this article, we are going to take a look at where Lowe’s Companies, Inc. (NYSE:LOW) stands against other best dividend stocks for long-term income.
Passive income, which refers to money earned with little ongoing effort, was once largely the domain of the wealthy – those who could afford to invest in rental properties or build up portfolios that reliably generated dividends. However, since the pandemic, the idea has gained fresh momentum, particularly among millennials and Gen Z, who are coming up with increasingly inventive ways to establish passive income sources.
According to experts, the surge in interest is being driven by a mix of tough job market conditions and the strong influence of social media. While passive income can be a viable option for some, it may not live up to the hype for everyone, as the promise of easy earnings often proves more complex in practice.
Side hustles are becoming increasingly popular as a way for people to bring in passive income. Gen Z, in particular, has moved past the misconception that passive income involves no effort. Instead, they see launching a side business as a valid way to earn money alongside a full-time job. In the past, starting a business often meant renting a physical storefront and paying for newspaper ads. Today, it’s a different story—entrepreneurs can build a website from home using platforms like Squarespace, promote products on TikTok, and hold meetings with clients or collaborators over Zoom. For Gen Z—many of whom were born in the late 1990s—these digital tools have been part of their everyday lives for as long as they can remember.
Natasha Stanley, head coach at Careershifters.org, pointed out that individuals now have far more resources at their disposal to build something independently. She observed that access to the entrepreneurial space had become more inclusive and widespread. The shift toward remote work and education during the pandemic, she noted, had also made the idea of self-employment feel more within reach for many people.
One proven way of generating passive income is through investments in dividend stocks. Companies that generate surplus profits often decide to share a portion of that money with their investors through dividends. The amount they return is typically measured using the dividend yield, which is calculated by dividing the yearly dividend payment by the current stock price.
According to Brian Bollinger, founder of Simply Safe Dividends, building a portfolio focused on dividend-paying stocks can be a game-changer. He explains that depending on regular dividend payments—rather than relying solely on profits from selling stocks—can help reduce the risk of draining your investments. Unlike managing rental properties, he notes, collecting dividends requires very little effort. He made the following comment about dividend investing:
“You could be setting yourself up quite nicely. Because not only do stocks pay a dividend, but they might increase the dividend, and they could benefit from price appreciation as a result of improving earnings outlook and so forth. It’s really about finding companies that can pay safe and rising dividends over time. And as long as that holds true over your retirement horizon, that’s a pretty, pretty nice thing to have.”
A family excitedly browsing through the aisles of a home improvement retail store.
Our Methodology:
For this article, we scanned Insider Monkey’s database of over 1,000 hedge funds as of Q4 2024 and selected stocks with strong dividend policies, sound financials, and dividend growth histories. These stocks have a minimum of 1% yield, as of April 24. The stocks are then ranked according to hedge funds having stakes in them.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Lowe’s Companies, Inc. (NYSE:LOW)
Number of Hedge Fund Holders: 70
Lowe’s Companies, Inc. (NYSE:LOW) is an American home improvement company, headquartered in North Carolina. The company has recently refined its strategic priorities to enhance its competitive position. Efforts have been directed toward strengthening its digital capabilities, streamlining its supply chain, and deepening customer relationships through upgraded technology. By focusing on an omnichannel strategy that blends online and in-store operations, the company aims to maintain stable profitability while offering customers a consistent and seamless shopping experience.
In the fourth quarter of 2024, Lowe’s Companies, Inc. (NYSE:LOW) reported revenue of $18.55 billion, reflecting a slight year-over-year decline of 0.3%. However, earnings exceeded expectations by $260 million. Comparable sales saw a modest 0.2% increase, supported by strong performance in the Pro customer segment, increased digital engagement, a successful holiday season, and recovery efforts following a hurricane.
By the end of the year, Lowe’s Companies, Inc. (NYSE:LOW) held $1.8 billion in cash and equivalents, nearly double the $921 million reported at the end of 2023. Operating cash flow rose to $9.7 billion from $8.1 billion the prior year. The company returned $6.5 billion to shareholders through dividends and share repurchases. Thanks to its solid financial footing, Lowe’s maintains one of the longest streaks of dividend growth in the market, spanning 59 consecutive years. Its quarterly dividend comes in at $1.15 per share and has a dividend yield of 2.07%, as of April 24.
Overall, LOW ranks 6th on our list of the best dividend stocks for long term passive income. While we acknowledge the potential of LOW as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued dividend stock that is more promising than LOW but that trades at 10 times its earnings and grows its earnings at double digit rates annually, check out our report about the dirt cheap dividend stock.
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Disclosure: None. This article is originally published at Insider Monkey.