Back to top

Analyst Blog

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

In a bid to enhance shareholder value, Leggett & Platt Inc. (LEG - Analyst Report) 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 run.

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% - 40%.

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.

Our Recommendation

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 revives.

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 with Steelcase Inc. (SCS - Snapshot Report) and Genuine Parts Company (GPC - Analyst Report).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
LAKE SHORE G LSG 0.77 +6.05%
QUESTCOR PHA QCOR 80.07 +2.47%
VIPSHOP HOLD VIPS 156.35 +1.82%
ENLINK MIDST ENLC 36.29 +1.60%
BNC BANCORP BNCN 17.33 +1.58%