Cushion Your Portfolio With This Dividend Aristocrat

Leggett & Platt is far from being a household name. Many investors have probably never even heard of the company. But dividend growth investors looking for reliable growth and annual dividend increases should take a closer look at this Dividend Aristocrat, currently yielding an attractive 3.8%. Steady dividend stocks like LEG do not often get much coverage in the financial news, but it's an example of a consistent dividend growth stock that can generate tremendous returns for shareholders over long periods of time. Steady as She Goes Leggett & Platt is a diversified manufacturing company. It was founded in 1883 when an inventor named J.P. Leggett created a bedspring that was superior to the existing products at that time. Leggett & Platt now designs and manufactures a wide variety of products, including bedding components, bedding industry machinery, steel wire, adjustable beds, carpet cushioning, and vehicle-seat support systems. A shareholder-friendly company, Leggett & Platt has increased its dividend each year for 48 consecutive years. Only 10 other companies in the S&P 500 index have a longer streak of annual dividend increases, according to Leggett & Platt, The company's long history of annual dividend increases is due to its high-quality business model. Leggett & Platt reported its second quarter earnings results on July 29. The company reported revenues of $1.21 billion for the quarter, which represents a 10% growth rate compared to the prior year's quarter. Revenue growth was based on a 16% sales gain thanks to the impact of acquisitions, while organic revenues declined by 6% year-over-year. Leggett & Platt generated earnings-per-share of 64 cents during the second quarter, which represents a small gain vs. earnings-per-share of 63 cents during the previous year's quarter. Leggett & Platt's earnings-per-share for the second quarter also beat the analyst consensus estimate by a penny, or roughly 1.5%. Looking ahead, Leggett & Platt expects 2019 to be a year of impressive growth. Even though management lowered its full-year targets after last quarter's earnings report, the company forecasts revenues of $4.70 billion to $4.85 billion for fiscal 2019. This guidance range still represents a revenue growth rate of 10% to 14% compared to fiscal 2018. Competitive Advantages Fuel Consistent Growth Leggett & Platt has all the elements of a steady dividend-growth stock. With a management team that is dedicated to increasing the dividend every year, Leggett & Platt has a global business model with a leadership position across its product portfolio, along with the scale and financial flexibility to cut costs when times are tough. Leggett & Platt grew its earnings-per-share by 14% annually between 2009 and 2018, as the global economy emerged from one of the worst economic downturns in decades. It has continued to grow at a strong rate more recently. Between 2013 and 2018, Leggett & Platt grew its earnings per share by 10% annually. Double-digit earnings growth is a very positive sign that the company possesses a strong business model. Leggett & Platt has a positive growth outlook. The company targets at least 6% annual revenue growth over the long-term. Acquisitions will help boost growth, including the $1.25 billion takeover of Elite Comfort Solutions last year. The deal significantly expanded Leggett & Platt's exposure to specialty foam and other hybrid bed products. The acquisition is expected to be accretive to earnings, starting in 2020. We expect 6% annual earnings growth over the next five years. Revenue growth from acquisitions, margin expansion, and share repurchases will also help maintain earnings growth. Leggett & Platt is highly profitable, which has allowed the company to return cash to shareholders each year for many decades. And, Leggett & Platt has durable competitive advantages, which add to its dividend safety. The company has more than 125 manufacturing facilities worldwide, which provides economies of scale. Leggett & Platt also has an expansive intellectual property portfolio, consisting of 1,500 issued patents and nearly 1,000 registered trademarks. Value, Growth and Income In One Stock Shares of Leggett & Platt trade for a price-to-earnings ratio slightly below 17, a reasonable valuation for a profitable company and a Dividend Aristocrat. In addition, the stock has a high dividend yield of 3.8%, which is approximately double the average dividend yield of the S&P 500 index right now. In an environment of falling interest rates, a nearly 4% yield from a proven dividend growth stock is highly appealing for income investors. The dividend is very safe, as Leggett & Platt maintained its dividend growth streak even during the Great Recession. Based on 2019 EPS projections of around $2.50, Leggett & Platt has a dividend payout ratio of approximately 64%. This leaves plenty of profits left over for share repurchases, debt repayment, and growth investments, while still rewarding shareholders with a competitive dividend. Leggett & Platt should continue to grow earnings at a mid-single-digit rate each year, barring a deep and prolonged recession. The company benefits from global economic growth, while share repurchases will add to EPS growth. As a result, Leggett & Platt is an attractive combination of growth, value, and dividends all in one stock. This Dividend Aristocrat is a buy for long-term income investors looking to avoid taking excessive risks in the stock market.

Cushion Your Portfolio With This Dividend Aristocrat

Lacking the flash and name recognition of some popular stocks, Leggett & Platt is shareholder-friendly company yielding an attractive 3.8%.

Columnist Conversation

Monday Morning Fibocall for 9/20/2021

Interested in Uranium? Just Saying

A $396,000 Vote of Confidence in American Woodmark (AMWD)

COLUMNIST TWEETS

Please Join or Log In to manage and receive alerts.