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This Dividend Aristocrat Has Raised Payments For 42 Straight Years
4/12/2013 9:30:00 AM
In light of a sloweconomy in recent years, it's remarkable
when you can find a company that has delivered strong dividends
and impressive returns.
The company operates in four distinct segments:
1. Residential furnishings: Leggett & Platt is an industry leader in bedding accessories, carpet cushions and mattresssprings .
2. Industrial materials: The company is also the leading U.S. producer of steel wire and specializes in shaped wire, coated wire and erosion control products.
3. Commercial fixtures and components: Leggett & Platt makes fixtures and point-of-purchase displays for retail outlets and components of office furnishings.
4. Specialized products: Leggett & Platt also makes a variety of other products, such as automotive seatingsupport and comfort systems, quilting and sewing equipment, and wire-forming equipment used in bedding and vehicles.
For 2012, Leggett & Platt'searnings per share ( EPS ) from continuing operations was $1.46, a record for the company.Analysts recently raised theirEPS forecasts for 2013, to between $1.50 and $1.75 per share. That's becausesales are expected to be $3.75 billion to $3.95 billion, reflectingrevenue growth of 1% to 6%.
Improved operating margins helped Leggett & Platt post strong bottom-line results in the fourth quarter of 2012, withearnings surging more than 45% from the same quarter the previousyear , to 32 cents per share.
Last year also marked the fifth consecutive year that Leggett & Plattshares beat the S&P 500, with an average annualgain of 19.7%, compared with 14.6% for the S&P. Take a look at its stock's performance since 2009:
Leggett & Platt is in the midst of a three-part strategic plan announced in late 2007 to divest itself of low-performing businesses and focus on improving margins and returns, with the goal of annual top-line growth of 4% to 5%. However, strategic acquisitions have also been a focus for Leggett & Platt, which enhanced its industrial materials portfolio last year with its purchase of Western Pneumatic Tube Holding, a leading provider of aerospace components.
Compared with its competitors, Leggett & Platt has enjoyed a higher return onequity (15.5% compared with 11.6%) and net margins (6.7% versus 4%). Its forwardprice-to-earnings ratio of about 20 is in line with competitors, but its 3.5% dividend is more attractive than the industry average of 2.5%.
Risks to consider: Competitive pressures could make it difficult for Leggett & Platt to implement new strategies, and intense regional competition makes it difficult to stand out. The company has done well, but changes in consumer preferences and budgets can change at a moment's notice. Volatility in raw material prices is also a significant risk that could affect Leggett & Platt's margins. Finally, a quarter of Leggett & Platt's sales are made overseas, which exposes the company tocurrency fluctuations and political and economic risks. Even faced with these risks, however, Leggett & Platt still looks like a solid choice with its strong dividend and track record of steady growth in good and bad economies alike .
Action to take --> Buy Leggett & Platt at up to $35 a share. With a 3.5% dividend, solid strategy and strong growth, the stock could climb to $40 to $45 a share within the next 12 months on the steady demand for home, office and hotel furnishings.