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My entire career has been spent in industry within the finance and accounting realm. My career started in 1985 and has included exposure to implementing SFASs; business and financial analysis; mergers and acquisitions; designing and implementing financial systems; and regulatory reporting.... More
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Dividends Value
  • Leggett & Platt Inc. (LEG) Has Many Good Attributes
    This article originally appeared on The DIV-Net September 14, 2009.

    Linked here is a detailed quantitative analysis of Leggett & Platt Inc. (LEG). Below are some highlights from the above linked analysis:

    Company Description: Leggett & Platt Inc. makes a broad line of bedding and furniture components and other home, office and commercial furnishings, as well as diversified products for non-furnishings markets.

    Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
    1. Avg. High Yield Price
    2. 20-Year DCF Price
    3. Avg. P/E Price
    4. Graham Number
    LEG is trading at a discount to only 1.) above. The stock is trading at a 146.2% premium to its calculated fair value of $7.57. LEG did not earn any Stars in this section.

    Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:
    1. Free Cash Flow Payout
    2. Debt To Total Capital
    3. Key Metrics
    4. Dividend Growth Rate
    5. Years of Div. Growth
    6. Rolling 4-yr Div. > 15%
    LEG earned three Stars in this section for 1.), 2.) and 3.) above. A Star was earned since the Free Cash Flow payout ratio was less than 60% and there were no years with negative Free Cash Flows over the last 10 years. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45% and earned a Star for having an acceptable score in at least two of the four Key Metrics measured. The company has paid a cash dividend to shareholders every year since 1939 and has increased its dividend payments for 37 consecutive years.

    Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:
    1. NPV MMA Diff.
    2. Years to > MMA
    LEG earned a Star in this section for its NPV MMA Diff. of the $867. This amount is in excess of the $500 target I look for in a stock that has increased dividends as long as LEG has. The stock's current yield of 5.47% exceeds the 3.9% estimated 20-year average MMA rate.

    Other:LEG is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index. In spite of operating in a cyclical industry, LEG has a long history of profitability and strong free cash flows. LEG's markets have mostly stabilized, but demand will likely be slow until the economy recovers in 2010. The company expects to generate more than $400 million in operating cash in 2009. Risks include poor market conditions and increases in raw materials costs.

    Conclusion: LEG did not earn any Stars in the Fair Value section, earned three Stars in the Dividend Analytical Data section and earned one Star in the Dividend Income vs. MMA section for a total of four Stars. This quantitatively ranks LEG as a 4 Star-Buy.

    Using my D4L-PreScreen.xls model, I determined the share price could increase to $21.91 before LEG's NPV MMA Differential fell to the $500 that I like to see for a stock with 37 years of consecutive dividend increases. At that price the stock would yield 4.65%.

    Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $500 NPV MMA Differential, the calculated rate is 0.2%. This dividend growth rate is lower than the the 2.0% used in this analysis, thus providing a margin of safety. LEG has a risk rating of 2.50 which classifies it as a high risk stock.

    LEG has many good attributes working in its favor including: Excellent Free Cash Flow Payout at 34%, and Debt To Total Capital at 32%, a good NPV MMA Diff. and a favorable dividend yield and a long history of dividend increases. However, LEG is trading significantly above its buy price of $7.57. Near-term I will not be a buyer, but this is a stock I will keep a close watch on. For additional information, including the stock's dividend history, please refer to its data page.

    Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.

    I held no position in LEG (0.0% of my Income Portfolio).

    What are your thoughts on LEG?

    Related Articles:
    Tags: LEG, DIVIDENDS
    Sep 27 08:02 am | Link | Comment!
  • Pocket Change Portfolio – August 2009
    Each month I update the Pocket Change Portfolio (PCP). The table below reconciles the PCP from beginning of period to end of period for August 2009, Year-To-Date (2009) and Life-To-Date. The Portfolio Returns line provides the calculated return for the three displayed periods.

    Description August-2009 Year-To-Date Life-To-Date
    Beg. Portfolio Value 8,449.83 3,395.62 -
    Online Cash Receipts 1,089.83 5,789.61 9,337.95
    Online Expenses - (30.00) (116.23)
    Gross Profit 1,089.83 5,759.61 9,221.72
    Dividends 13.58 101.9 127.06
    Interest Income 1.13 8.38 14.53
    Subtotal 1,104.54 5,869.89 9,363.31
    Gain/(Loss) 54.71 343.57 245.77
    Ending Portfolio Value 9,609.08 9,609.08 9,609.08
    Portfolio Returns 0.70% 9.84% 8.74%

    Online Cash Receipts are the collected earnings from my online endeavors. Most of which is advertising on the my various blogs. The year-to-date $30.00 Online Expenses relates to registering 3 domains (DividendsValue.com, Dividends4Life.com and TheDiv-Net.com). The August Dividends include $4.78 from Vanguard Long-Term Bond ETF (BLV) and $8.80 from Procter & Gamble Co. (PG). The Interest Income line is interest earned on cash balances in an ING acount I set up for the PCP. The Gain/(Loss) line is for market changes to the PCP (realized and unrealized).

    The portfolio continued to do well in the month of August generating positive returns. Online earnings in August surpassed the $1,000 mark for the first time. A large portion of the increase related to continued strong interest in D4L-Premium Services.

    During the month of August, I purchased 28 shares of Genuine Parts Co. (GPC). This will provide me $44.80 in annual earnings at the current dividend rate. Including GPC, my annual PCP dividend income is now $360.46 at the current dividend rates. I ended the month with $1,042.42 in cash, enough to purchase my ninth PCP stock in September. It is my goal to have sufficient earnings to purchase a stock at least eight times a year. Through August I have purchased six stocks this year, including four in consecutive months since May 2009.

    My PCP holdings are always available by selecting the Holdings option from the menu in the header. The next PCP update will be mid-October.

    Disclosure: Long BLV, PG, GPC

    Related Posts:

    Tags: BLV, PG, GPC, PCP, Progress
    Sep 20 05:06 pm | Link | Comment!
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