In a bid to enhance shareholder value,
Leggett & Platt Inc.
) recently increased its quarterly dividend by 3.6% -- a penny --
to 29 cents per share. The company has been consistently increasing
its dividend for the past 41 years at a compounded annual growth
rate of 13%.
The new dividend will be paid on October 15, 2012 to
shareholders of record as of September 14, 2012. The annualized
dividend yield, based on the increased dividend and current stock
price, is approximately 5%. Previously, on August 2, 2011, Leggett
raised its dividend to 28 cents from 27 cents per share.
Dividend increase has emerged as a trend among companies having
a stable cash position and healthy cash flow. We believe that
Leggett's assertion of increase in dividend signifies its ability
to generate liquidity and its potential to improve in the long
Recently, Leggett exited the second quarter of fiscal 2012 with
cash and equivalents of $271.2 million, long-term debt of $821
million and shareholders' equity of $1,347 million. Moreover, the
strength in the company's financial base also reflected from its
existing commercial paper program and revolver facility balance in
excess of $330 million.
Net debt to net capital at quarter end was 33%, a decline from
34% in the previous quarter. The company's current net debt to net
cap ratio remains within its long-term target range of 30% -
Further, for 2012, the company expects to generate about $350
million in cash from operations, with capital spending and
dividends estimated at about $90 million and $160 million,
respectively. In addition, the company expects to distribute about
2 million of its common shares in the form of employee benefit and
stock purchase plans.
Market has been expecting a positive revision in the quarterly
dividend rate and this expectation increased further with the
company's strong performance in the recently concluded quarter.
Leggett & Platt has a well-diversified customer base and
solid research and development capabilities, which provide a
competitive edge to the company 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 grab opportunity when the economy
Leggett & Platt currently retains a Zacks #2 Rank, which
translates to a short-term Buy rating. However, we remain slightly
cautious on the stock and uphold our long-term Neutral
recommendation, waiting to see further catalysts before becoming
more positive on the stock.
Founded in 1883 and headquartered in Carthage, Missouri, Leggett
& Platt is a global manufacturer that conceives, designs and
produces a broad variety of engineered components and products for
homes, offices, retail stores and automobiles. The company's most
important product line includes components for residential
furniture and bedding, retail store fixtures and point of purchase
displays, and components for office furniture. The company competes
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