After flaunting a strong second quarter, despite sales declines
at Store Fixtures and Commercial Vehicle Products (CVP),
Leggett & Platt Inc.
) is here again to woo shareholders with a 3.3% increase in
dividend. The company has raised its dividend by a penny to 31
cents per share and thus bringing the annual dividend to $1.24. The
company has been consistently increasing its dividend for the past
43 years at a compounded annual growth rate of 13%.
The new dividend is payable on Oct 15, 2014 to shareholders of
record as of Sep 15, 2014. The annualized dividend yield, based on
the increased dividend and last closing stock price, is
approximately 3.7%. Previously, on Aug 8, 2013, Leggett raised its
quarterly dividend to 30 cents from 29 cents per share.
We believe that Leggett's hike in dividend shows its ability to
generate liquidity and potential to improve in the long run. Last
week, Leggett reported second-quarter 2014 financial results with
cash and equivalents of $304.2 million, long-term debt of $926.0
million and shareholders' equity of $1,262.4 million. Moreover, the
strength in the company's financial base is reflected in a balance
of $340 million under its existing commercial paper program.
Net debt to net capital ratio as of Jun 30, 2014 was 35.6% despite
the normal seasonality of its business, impairment charges and the
purchase of Tempur Sealy's innerspring plants. This stood near the
mid-point of the company's long-term targeted range of 30%-40%.
Further, for 2014, the company expects to generate over $350
million in cash from operations, with capital spending estimated at
about $100 million and dividend payouts worth $170 million.
Further, Leggett hopes to continue with its share repurchase
program, intending to buy back 5-7 million shares and issue nearly
2 million shares under the employee benefit plans in 2014.
Considering the previous track record, the market has been
expecting a positive revision in the quarterly dividend rate and
the company's strong performance in the recently concluded quarter
further intensified this expectation.
Increasing the dividend has been a common move for companies with a
stable cash position and healthy cash flow. Other firms like
Republic Services Inc. (
), Nabors Industries Ltd. (
) and Neenah Paper Inc. (
), have also raised their quarterly dividends recently by 7.7%, 50%
and 12.5%, respectively.
Leggett & Platt, which currently carries a Zacks Rank #3 (Hold)
has a well-diversified customer base as well as solid research and
development capabilities. These give the company a competitive edge
and strengthen its pricing power in the market. With a low
fixed-cost base, spare production capacity and healthy operating
cash flow generating capability, the company remains well
positioned to avail opportunities once the economy revives.
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