Leggett & Platt, Incorporated (LEG) is a 128-year old manufacturer of engineered products based in Carthage, Missouri. The company's stock currently yields 5.3% and provides a welcome dividend stream to conservative investors. In this article, I'll examine a few aspects of Leggett & Platt's business model.
Leggett & Platt is an industry leader in designing, testing, manufacturing, and marketing bedding components, residential and office furniture, store fixtures, displays, die castings, custom tooling, machining, drawn wire, welded steel tubing, specialty wire products, auto seating suspension, lumbar support, and control cable systems. The company has 18,000 worldwide employees and 140-manufacturing facilities spread out among 18 countries. A breakdown of 2010 sales can be viewed in the following pie chart:
Leggett & Platt is a leading manufacturer in the following markets:
- Components for bedding and home furniture,
- Carpet underlay,
- Power-based foundations,
- Components for business office at home, and office furniture,
- Drawn steel wire,
- Automotive seat lumbar systems
10-Year Stock Price and Dividend Growth
Leggett & Platt have had a wild ride over the past 10 years. Although the stock hasn't moved materially through present date, the 2008-2009 financial crisis did dampen revenues and earnings. The dividend did increase each year, however. The below chart (click to enlarge) highlights the 10 year price movement of Leggett & Platt common stock:
Current Dividend and Fiscal Guidance
Leggett & Platt's dividends have increased for the past 40 years. Dividends have compounded at a 15% annual rate. On August 2nd, Leggett & Platt's management stated they would increase the quarterly dividend by 3.7% to 28 cents per quarter. The yield currently offers a 5.3% annual yield. This return, in terms of yield equivalents, is significantly higher than the alternatives. As of October 7th, a 5-year Treasury Bond yielded 50 basis points or 1/2 of one percent.
Leggett & Platt's financial goals are threefold:
- finish in the top 1/3 of the Standard & Poor's 500 for total return
- increase annual sales growth by 4-5%
- maintain the net debt ratio between 30% - 40% of net capitalization.
Leggett & Platt's capital structure currently has 37% in long-term debt, with the remaining percentage in stock. The company does not have any preferred shares. Management has stated their short-term and long-term goals to maintain long-term debt between 30-40% of the capital structure.
Leggett & Platt have an extensive list of financial accomplishments. The company is one of Standard & Poor's “Dividend Aristocrats"; the company is recognized by Fortune's magazine as one of the “World’s Most Admired Companies”; and is ranked in Mergent's Dividend Achievers as #34 in terms of the number of years of consecutive dividend growth.
The company is well diversified with its largest customer maintaining a 6% position of total sales. The number one raw material is steel. If steel increases in wholesale price, then costs will have to be passed down to customers.
The stock remains stable and offers a competitive dividend. The company is willing to engage in acquisitions but only if the deal makes fiscal sense and is accretive to earnings per share. The company is a market leader in many segments. Leggett & Platt should continue to offer a blue chip dividend and focus upon maintaining a conservative balance sheet.
Leggett & Platt Peer-Group Analysis:
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Herman Miller (MLHR)
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Dixie Group (DXYN)
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Ethan Allen Interiors (ETH)
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Ethan Allen Interiors merchandise includes a wide variety of household furniture: beds, dressers, armoires, tables, chairs, buffets, entertainment units, home office furniture, recliners, chairs, sofas, and wooden accents. upholstery home furnishing items comprising sleepers, love seats, cut fabrics, and leather; and home accessory and other items consisting of window treatments, wall decor, lighting, clocks, bedding and bedspreads, decorative accessories, area rugs, and home and garden furnishings.
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SEC Form 4 Updates
Here is the listing of the recent SEC Form 4 "Statement Of Changes In Beneficial Ownership." Click to enlarge: