As the home improvement industry's second-largest retailer, Lowe's (NYSE:LOW) can't escape comparisons with Home Depot (NYSE:HD), whose annual sales footprint is a whopping 40% greater than Lowe's $69 billion. The good news is that this smaller position gives Lowe's room for faster growth, and in fact its earnings gains should beat Home Depot's in 2017 as it adds 25 new locations to the store base while its rival's count holds flat.

Yet Lowe's is the weaker stock buy today when judged as an income investment.

A cart sits in a home improvement aisle.

Image source: Getty Images.

The growth matchup

Lowe's can't seem to break Home Depot's market share momentum, no matter how hard the retailer tries. In the second quarter of 2017, for example, executives announced a plan to accelerate growth after comparable-store sales gains came in at 4.5% compared to Home Depot's 6.3%.

However, despite the extra costs involved with keeping stores open longer, Lowe's lost additional ground to its chief rival over the next few months. Home Depot's third-quarter comps sped up to a 7.9% pace while Lowe's expanded by 5.7%. In response, the market leader raised its full-year outlook and now expects comps to rise 6.5% in 2017. Lowe's kept its full-year target unchanged at a disappointing 3.5%.

This growth gap effectively neutralizes any advantage that Lowe's enjoys as the smaller retailer in the industry. Sales should only rise 5% in 2017 even though it is adding aggressively to its store base this year, whereas Home Depot, which isn't adding any new locations in the U.S., is set to expand revenue by 6.3% to surpass $100 billion.

Dividend strength

The biggest knock against Home Depot's dividend is that it doesn't have an impressively long track record. While Lowe's kept up modest annual increases during the worst of the housing market crisis (and hasn't missed a raise in 56 years), Home Depot paused its hikes as sales shrank in 2008 and 2009 and as profitability dove.

There are good reasons to expect faster, more consistent dividend growth from here, though. Home Depot's profit margin has been setting new all-time highs since early 2015, after all, while Lowe's is still working toward the record it set just before the industry collapse that began in 2007. Home Depot's successes in catering to the professional side of the business, and in stuffing its aisles with exclusive and innovative merchandise, is making the difference on this score.

LOW Operating Margin (TTM) Chart

LOW Operating Margin (TTM) data by YCharts.

Home Depot aims to deliver 55% of its annual earnings to shareholders in dividends. That payout ratio is a bit more generous than average, and it's far above the 35% that Lowe's promises. With profits on track to rise by 14% in 2017, meanwhile, income investors stand a good chance to see another double-digit dividend boost in March to follow last year's 29% spike.

Lowe's more conservative payout ratio provides a big cushion that would protect the dividend in the event of another dramatic pullback in the industry. But that's a narrow circumstance to base your entire income investing decision upon. If the market holds steady, or continues expanding at least into 2019, as Home Depot executives believe it will, then the industry leader's shareholders can expect healthy dividend growth with very little risk of a pause to payout hikes. Toss in the fact that that Home Depot sports a slightly higher yield today, and the better income choice is clear.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.