Inflation is running rampant, gas prices are skyrocketing, commodity prices are soaring, and the Federal Reserve is preparing to raise interest rates. With that backdrop, the economy is looking more fragile today than it has at any time in recent memory, and it's understandable why people might be reluctant to take too many risks with their money these days.
The S&P 500 is down 12%, putting it officially in correction territory, and with the prospect that things could get worse, putting money into the stock market may be the last thing you want to do. That could be a mistake.
Since the end of World War II, the benchmark S&P 500 has tumbled 10% or more over two dozen separate times. But it's important to keep such pullbacks in perspective. The Schwab Center for Financial Research says the average bear market has lasted only about 17 months, and 80% of corrections since 1974 have not turned into a bear market.
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The key to navigating such turbulent times is finding solid companies with a long track record of performing in all kinds of markets, both good and bad. And if they pay a dividend, all the better, as dividends can help soothe the turmoil a correction or a recession causes. Dividend stocks have outperformed non-payers over the past 100 years. Even when the market as a whole was reporting negative returns, such as in the 2000s, dividend stocks still eked out gains.
That's why Lowe's (LOW -0.14%) is my top stock to buy today. It's a great company with a history of being a top performer regardless of the market, and also has a strong record of paying dividends and raising them.
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Building upon a foundation of growth
Home improvement retailer Lowe's is still benefiting from the housing boom brought on by the pandemic. It recently reported fiscal fourth quarter results that easily beat analyst expectations on the top and bottom line while offering guidance for the coming year that also exceeded Wall Street forecasts.
All of its merchandising departments saw comparable store sales up 18% over a two-year time frame, but it continues to see special strength in the purchase of big ticket items such as appliances, including ranges, cooktops, and dishwashers, which had the strongest sales for the fourth quarter.
Durable goods continue to rise, according to the U.S. Census Bureau, up 1.6% in January (the latest data available) on top of a 1.2% increase in December. In fact, there have been eight out of nine months of month-to-month increases recorded, and because of supply chain issues that continue to plague the industry, unfilled orders for manufactured durable goods have risen for 12 straight months.
Still, there are clouds on the housing market. As mentioned, the Fed is getting to raise interest rates and is expected to do so several more times this year, which will raise mortgage rates and cause demand to soften.
Even so, with unconstrained demand for new homes still rampant, inventory of homes for sale is at four-decade lows and sales dipped in January (again, the latest data). There could be a downturn in the housing market, but Lowe's investors shouldn't fret.
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Down home appeal
Although there is a correlation between home buying and rising durable goods orders, when people can't buy a new house -- whether because of runaway pricing or economic distress -- consumers tend to invest in their current homes.
Redecorating, new additions, and even new appliances can make an existing home feel new and fresh, and it's why Lowe's can prosper in booms and busts.
Lowe's tends to cater more to homeowners than rival Home Depot (HD -0.31%), which is geared more toward the professional contractor, so even if there is a housing market slowdown it won't affect the retailer as badly. Where contractors represent 45% of Home Depot's total sales, they account for just 20% to 25% of Lowe's revenue.
And then there's the Lowe's dividend to sweeten the deal.
Sharing the wealth
Lowe's has paid a dividend to shareholders every quarter since going public in 1961. It attained the status of Dividend King a few years ago as it has increased the payout for 56 consecutive years. After having last raised it in May 2021, there's good likelihood it will do so again this year.
I like stocks with measurable records of performance that have prospects for continued growth going forward. Lowe's isn't going to exhibit the explosive growth of a tech stock, but it is a steady player that rewards shareholders year in and year out. That's why it's my top stock pick today.
