While the pandemic has had a negative impact on retail businesses across the US, there has been an unintended positive impact. As more Americans spend time at home, DIY and home improvement activities have seen an uptick. This trend has helped home improvement stocks of companies that have seen robust sales during the summer.
Two of the top home improvement stocks are Lowe’s and Home Depot. Lowe’s has gained 27.74% since the start of the year and 131% since the March market fall. Home Depot, on the other hand, has risen by 25.16% since January 2nd, 2020, and 80% since March 20th, 2020. Home Depot is the world’s largest home improvement chain while Lowe’s is the second largest. The two together form a duopoly in the US market.
Home Depot has a gross margin of 34% while Lowe’s is slightly lower at 32%. Home Depot’s inventory turnover is above 7 while Lowe’s turns its inventory 5.29 times. Valuation wise, the two stocks aren’t that far apart. Home Depot has a P/E ratio of over 27 while Lowe’s has a P/E ratio of almost 26 (as of August 12th, 2020).
Another factor that makes these two companies the best home improvement stocks to buy is their dividend payouts. Home Depot is on course to complete 11 consecutive years of dividend increases. Home Depot’s current yield (as of August 12th, 2020) stands at 2.18%. Lowe’s is in a league of its own. It is considered to be a Dividend Aristocrat as it has increased its dividends for 57 consecutive years. Lowe’s current yield (as of August 12th, 2020) stands at 1.43%.