In an attempt to enhance shareholder value,
Leggett & Platt Inc.
) recently increased its quarterly dividend by 3.4%, nudging up a
penny to 30 cents per share and thus bringing the annual dividend
to $1.20. The company has been consistently increasing its
dividend for the past 42 years at a compounded annual growth rate
The new dividend is payable on Oct 15, 2013 to shareholders of
record as of Sep 13, 2013. The annualized dividend yield, based
on the increased dividend and last closing stock price, is
approximately 3.9%. Previously, on Aug 8, 2012, Leggett raised
its quarterly dividend to 29 cents from 28 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.
In late Jul 2013, Leggett reported second-quarter 2013 financial
results with cash and equivalents of $280.3 million, long-term
debt of $973.9 million and shareholders' equity of $1,433.7
million. Moreover, the strength in the company's financial base
is reflected in a balance of $479.0 million under its existing
commercial paper program.
Net debt to net capital at the quarter-end was 33%, down from
34% in the previous quarter. The company's net debt to net
capital ratio as of Jun 30, 2013 was 29.3%, marginally below the
company's long-term targeted range of 30.0%-40.0%.
Further, for 2013, the company expects to generate about $350
million in cash from operations, with capital spending and
dividends estimated at about $85 million and $125 million,
respectively. Further, Leggett expects to continue with its share
repurchase program, having a standing authorization to repurchase
up to 10 million shares every year.
Considering the previous track record, the 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.
Increasing the dividend has been a common move for companies
having a stable cash position and healthy cash flow. Notably, a
number of other firms have raised their quarterly dividend
payouts in the past one month. Such companies include
Union Pacific Corp.
Education Realty Trust Inc.
Arch Coal Inc.
). Education Realty and Arch Coal both raised their quarterly
dividends by 10% while Union Pacific increased its payout by
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
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