Six Dividend-Paying Home Improvement Investments to Purchase Amid COVID-19 Recovery

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Home Depot

Six dividend-paying home improvement investments to purchase amid the COVID-19 recovery include two U.S.-based home improvement retailing giants, a tractor supply company, an outdoor power tool maker and an exchange-traded fund (ETF) that consists of consumer discretionary stocks.

The six dividend-paying home improvement stocks to purchase in pursuit of profits from a COVID-19 recovery give investors a chance to benefit from property owners who are upgrading their houses while many of them work remotely to protect themselves from the risk of contracting the deadly virus. Other home owners may want to improve their properties to prepare them for sale as prices jump at their quickest pace in 15 years.

Low mortgage rates and limited available housing to satisfy soaring demand put sellers in a position to profit from their properties, particularly if they are looking to downsize to a smaller home or move further away from big cities with many employers allowing their employees to work remotely temporarily or longer term. In addition, the S&P CoreLogic Cash-Schiller property value index advanced 12% in February from the same month a year ago to mark the biggest increase since 2006.

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Six Dividend-Paying Home Improvement Investments to Purchase Feature Four Favorites from BoA Global Research

BoA Global Research placed four dividend-paying home improvement stocks on its buy list as the investment firm found key retailers and suppliers with promsing outlooks. In the home improvement retail arena, BoA raised its price objective for buy-rated Home Depot (NYSE: HD) of Atlanta, New York’s Lowe’s (NYSE:LOW) and Brentwood, Tennessee-based Tractor Supply Company (NASDAQ:TSCO), while describing Hong Kong’s outdoor power tool company Techtronic Industries Co. Ltd. (OTCMKTS:TNDF) and engine equipment manufacturer Generac Holdings Inc. (NYSE:GNRC), of Waukesha, Wisconsin, as well positioned in outdoor power tools.

Also a factor is that there are more real-estate agents than homes for sale in the United States, with the domestic housing market currently 3.8 million single-family homes short of meeting demand, according to mortgage financier Freddie Mac. Those who own homes increasingly seem to be trying to improve them, especially without the freedom to travel internationally and pursue other leisure activities due to the pandemic raging in many parts of the world, despite increased vaccinations of people in the United States and elsewhere.

With spring in the air, homeowners are now in their yards, according to a recent BoA research report. BoA featured buy-rated stocks that seem poised for a strong selling season, as first-quarter earnings reports near for key retailers and suppliers of the home improvement and furnishings sector.

Consumers’ intentions to spend on home improvement, furnishing and décor projects are starting to wane slightly, but not as quickly as previously expected, according to BoA. Nonetheless, the first quarter is shaping up to be bright for several key participants in these sectors, the report indicated.

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Six Dividend-Paying Home Improvement Investments to Purchase Offer Growth

One of the best-positioned categories for the current season is lawn and garden, BoA reported. Favorable factors for stocks in the category include: an earlier start to warm spring weather compared to 2020; sustained stay-at-home and work-from-home behavior; and a new round of stimulus payments that will put incremental cash in the hands of homeowners.

Among home improvement retailers, Lowe’s received an increased price objective of $250 per share, up from $215, BoA reported. Roughly 10% of Lowe’s 2020 sales came in the lawn and garden category, the investment firm noted.

Chart courtesy of www.StockCharts.com

Other stocks in the same category that gained increased price targets are Home Depot, with its outlook raised by BoA to $375 from $360 per share, along with Tractor Supply gaining an increased price target to $200 from $190 per share. As for outdoor power equipment makers, BoA gave Techtronic a price target of HK$157 and Generac a forecast of $382.

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Potential Catalysts for the Six Dividend-Paying Home Improvement Investments to Purchase

Catalysts that could drive spending trends to help home improvement stocks exceed expectations are the strength of the lawn and garden category and the likelihood of homeowners to go into their yards to pursue projects.

The two-year growth rate in home improvement spending has been running at 40-50% above 2019 levels, according to BoA. Positive trends for lawn and garden include expectations by BoA for favorable spring weather compared to 2020 and the lawn and garden category’s popularity as the home improvement category’s strongest. In addition, BoA survey respondents indicated they plan to go outside in their yards as avidly as ever.

The lawn and garden category has broad appeal for a wide range of household income levels and geographies, according to BoA. As a result, it is more likely to be favorably impacted by federal stimulus, while local sourcing of live goods like plants and flowers makes the category somewhat less vulnerable to supply shortages than other home improvement categories that have faced a lack of available lumber and building products.

Lowe’s Earns Place Among Six Dividend-Paying Home Improvement Investments to Purchase Amid Recovery

Lowe’s is the second-largest U.S. home improvement retailer, but it grew even faster in 2020 than Home Depot due to its overexposure to do-it-yourself customers to account for about 80% of its sales. This sets up Lowe’s for difficult comparisons in 2021, but BoA projects that reality check is more than priced into the stock.

“What we believe is not priced in is LOW’s superior earnings growth opportunity as it accelerates its transformation and its operating margin,” according to BoA.

“Lowe’s is one of my favorite stocks in the space,” said Jim Woods, editor of Successful Investing, Intelligence Report and Bullseye Stock Trader.

Columnist and author Paul Dykewicz meets with stock picker Jim Woods before COVID-19.

Woods recommends Lowe’s, which offers a current dividend yield of 1.2%, in his Intelligence Report newsletter’s Income Multipliers portfolio. That stock is up more than 100% during the past 52 weeks.

“The home-improvement retailer is benefiting from a confluence of positives, including COVID-19 stimulus payment, low interest rates on financing home projects and people putting money into their homes in order to make them sale ready,” Woods remarked. “Plus, the company’s management now has largely ironed out its past issues, and that’s why the stock has done so well of late.”

Home Depot Gains Position with Seven Top Home Improvement Stocks to Buy

Chart courtesy of www.StockCharts.com

Home Depot, offering a current dividend yield of 2.0%, stands out as the largest U.S. home improvement retailer and an undeniable beneficiary of pandemic-related consumer trends. BoA expects business tailwinds to persist for Home Depot into 2021 and beyond.

The company’s record-setting sales growth in 2020 now positions Home Depot with a “formidable balance sheet” that the company can use to “deepen its competitive moat” by investing in its online services and supply chain, according to BoA. The company also can deliver shareholder returns through share repurchases and dividend growth.

Tractor Supply Secures Spot Among Six Dividend-Paying Home Improvement Investments to Purchase

Throughout the COVID-19 pandemic, BoA forecast that large, well-capitalized retailers with superior omnichannel ecosystems are well positioned to gain market share from smaller retail chains and independent mom and pop businesses to drive pre-existing industry consolidation. Tractor Supply, offering a current dividend yield of 1.1%,  is an example of such a retailer.

The company is at the “epicenter” of several positive medium-term themes that include Americans seeking more space in suburban and rural markets, increased pet adoption during the pandemic and industry consolidation fueling growth for large chains.

Although Tractor Supply is a growth retailer that is expanding its square footage each year, it only trades at about 23x BoA’s 2022 estimate. TSCO remains a top BoA pick in retail for 2020.

Chart courtesy of www.StockCharts.com

Outdoor Power Equipment Makers Offers Non-Dividend-paying Alternative to Six Dividend-paying Home Improvement Investments to Purchase

Hong Kong-based Techtronic derives nearly 50% of its revenue from Home Depot to rank as the fastest-growing and most innovative power tool company in the home improvement space, according to BoA. The dividend-paying company is leveraging its proprietary lithium-ion technology to extend its product line into cordless outdoor equipment, where 95% of the market is still gasoline powered.

The company’s Ryobi and Milwaukee brands are now the largest do-it-yourself and pro tool brands in the world. Milwaukee has grown 20%-plus annually for the last five to seven years.

Generac, a designer, manufacturer and seller of power generation equipment, energy storage systems and other power products for the world’s residential, light commercial and industrial markets, remains the dominant provider of home standby generators. It has 80% of the home standby generator market and only 5% of U.S. homes currently have home standby power.

Generators are becoming more mainstream investments as the frequency of extreme weather seems to be rising, and consumers increasingly view the “Home as a Sanctuary” for work, play, entertainment and family care in the aftermath of the COVID-19 outbreak. The non-dividend-paying company is leveraging its brand to push further into renewable power and grid services to provide the most comprehensive product offering in the space, according to BoA.

Chart courtesy of www.StockCharts.com

“It’s gardening season,” said Hilary Kramer, who hosts the nationally aired “Millionaire Maker” radio program and heads the GameChangers and Value Authority advisory services.

Paul Dykewicz conducts a pre-COVID-19 interview with Hilary Kramer, whose premium advisory services include IPO Edge, 2-Day Trader, Turbo Trader and Inner Circle.

Dividend-paying Scott Miracle-Gro Co. (NYSE:SMG) and non-dividend-paying GrowGeneration Corp. (NASDAQ:GRWG) offer two preferred ways to profit from the home improvement wave, Kramer said. She praised them as “key suppliers” for lawn and “cottage agricultural business” alike.

Marysville, Ohio-based Scott Miracle-Gro Co. offers a current dividend yield of 1.1% and produces approximately $4.1 billion in sales. The company’s brands feature Scotts, Miracle-Gro and Orthos. 

Denver-based GrowGeneration Corp., Amierica’s largest hydroponics supplier with 53 retail and distribution centers, carries and sells thousands of products. Those preoducts include organic nutrients and soils, advanced lighting technology and state-of-the-art hydroponics equipment used by commercial and home growers.

Chart courtesy of www.StockCharts.com

Chart courtesy of www.StockCharts.com

Pension Fund Chairman Offers Fund for Six Dividend-Paying Home Improvement Investments to Purchase

Dividend-paying home improvement companies and stocks have done well during the pandemic as many people stayed home most of the time and received stimulus checks, said Bob Carlson, chairman of the Board of Trustees of Virginia’s Fairfax County Employees’ Retirement System with more than $4 billion in assets.

“But it’s likely that their rally is reaching a peak,” Carlson continued. “The second quarter of 2021 is likely to be the peak on spending for home improvement items. But many countries outside the U.S. have lagged in their recoveries and have more room to grow as vaccines are more widely distributed and the pandemic winds down.”

A conservative alternative to dividend-paying home improvement stocks is an exchange-traded fund (ETF), iShares Global Consumer Discretionary (RXI), that invests in global consumer discretionary stocks, said Carlson, who also heads the Retirement Watch investment newsletter. iShares Global Consumer Discretionary offers a current dividend yield of 0.6%. 

“The fund invests in companies in addition to home improvement companies and has a majority of its investments in the U.S.,” Carlson said. “The top holdings are Amazon, Tesla, and Home Depot. But it is a diversified way to benefit from higher consumer spending with some focus on home improvements.”

Chart courtesy of www.StockCharts.com

Pension fund and Retirement Watch leader Bob Carlson answers questions from Paul Dykewicz prior to COVID-19-related social distancing.

Six Dividend-Paying Home Improvement Investments to Purchase Deflect Deadly COVID-19 Crisis

Expanded COVID-19 vaccination rollout in recent months has raised hope for many people that the number of new cases and deaths caused by the virus will fall. The U.S. Food and Drug Administration (FDA) approved a third COVID-19 vaccine that was developed by Johnson & Johnson (NYSE:JNJ) and recently gave regulatory clearance for the pharmaceutical company to resume distribution, despite limited instances of serious side effects that temporarily put its use on hold.

U.S. COVID-19 cases have rocketed to 32,301,639 and led to 575,338 deaths, as of April 30. COVID-19 cases worldwide have soared to 150,699,791, with deaths totaling 3,169,494, according to Johns Hopkins University. The United States has endured the most COVID-19 cases and deaths of any nation, but India just incurred its ninth straight day of more than 300,000 new infections from the virus after a recent wave of large gatherings there. India’s health ministry reported 386,452 new infections on Friday, April 30, Media reports in India indicate that some public health experts speculate that the number of new infections may be at least five times greater than the government’s official count.

The six dividend-paying home improvement investments to purchase give investors a variety of choices to profit from the recent $1.9 trillion federal stimulus package, increased COVID-19 vaccine availability and a recovering economy. Positive current trends and financial results show the potential for further gains among the six dividend-paying home improvement investments to purchase.

Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Seeking Alpha, GuruFocus and other publications and websites. Paul, who can be followed on Twitter @PaulDykewicz, is the editor of StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul previously served as business editor of Baltimore’s Daily Record newspaper. Paul also is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The book is great as a gift and is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many others.

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