Tags: Leggett | dividend | challenge | LEG

Leggett & Platt Faces Dividend Challenge

By    |   Wednesday, 12 Oct 2011 02:59 PM

Manufacturer Leggett & Platt (LEG) prides itself on the company's historic total shareholder return, which includes a dividend which has increased each year for nearly four decades. However, recent sales and profit results could challenge the company on its policy of increasing the dividend as usual.

The primary business is the manufacture of components for furniture manufacturing. Products include springs, frames, and hardware for mattresses and upholstered furniture. Other lines of business include fixtures and display products for stores and industrial materials based on the company's expertise in wire and spring components. The furniture products group generates about half of sales.

For the second quarter of 2011, Leggett & Platt produced revenues of $945 million, up 8 percent from the $874 million in sales a year earlier. Net income per share was 37 cents, up from 34 cents. The earnings press release noted the increased revenues were almost completely due to price inflation, and that unit sales were flat year over year.

Also in the press release, company management tightened earnings guidance to a range of between $1.25 and $1.40 per share, lower than the previously issued top end for the range.

Dividend increases

The most recent dividend increase by the board of directors marked the 40th consecutive year of increases, placing Leggett & Platt on the S&P list of Dividend Aristocrats. The current $10.8 annual payout rate is 80 percent of the projected earnings per share for the year. The company has strived to pay out 50 to 60 percent of earnings as dividends, so the current ratio is well above this range.

The company estimates sales for the year will be between $3.5 billion and $3.7 billion. Production at full capacity would generate approximately $4.5 billion in revenues. Leggett & Platt would definitely benefit for an upswing in economic activity, allowing management to maintain its history of increasing dividends.

In the meantime, the dividend yield is well over 4 percent, so investors who think the company can keep up the dividend policy should be well rewarded.

The company reports next on Oct. 27.

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Manufacturer Leggett Platt (LEG) prides itself on the company's historic total shareholder return, which includes a dividend which has increased each year for nearly four decades. However, recent sales and profit results could challenge the company on its policy of...
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Wednesday, 12 Oct 2011 02:59 PM
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