Leggett & Platt, Incorporated (NYSE:LEG) is a true Dividend Rock Star. Its yield of 4.3% makes it one of the market's top dividend payer. In the past ten years, Leggett & Platt has also grown its dividend from $1 to $1.6. Below, I have outlined more attractive dividend aspects for Leggett & Platt for income investors who may be interested in new dividend stocks for their portfolio.
What Is A Dividend Rock Star?
It is a stock that pays a consistent, reliable and competitive dividend over a long period of time, and is expected to continue to pay in the same manner many years to come. More specifically:
It is paying an annual yield above 75% of dividend payers
It consistently pays out dividend without missing a payment or significantly cutting payout
Its dividend per share amount has increased over the past
It is able to pay the current rate of dividends from its earnings
It has the ability to keep paying its dividends going forward
High Yield And Dependable
Leggett & Platt currently yields 4.3%, which is high for Consumer Durables stocks. But the real reason Leggett & Platt stands out is because it has a high chance of being able to continue to pay dividend at this level for years to come, something that is quite desirable if you are looking to create a portfolio that generates a steady stream of income.
Reliability is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. In the case of LEG it has increased its DPS from $1 to $1.6 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes LEG a true dividend rockstar.
Leggett & Platt has a trailing twelve-month payout ratio of 71%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect LEG's payout to fall to 59% of its earnings. Assuming a constant share price, this equates to a dividend yield of 3.8%. However, EPS should increase to $2.51, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
Leggett & Platt ticks all the boxes for what I look for in a dividend stock. If you are looking to build an income focused portfolio, this could be one to include. However, given this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I've put together three key factors you should further research:
Future Outlook: What are well-informed industry analysts predicting for LEG’s future growth? Take a look at our free research report of analyst consensus for LEG’s outlook.
Valuation: What is LEG worth today? Even if the stock is a cash cow, it's not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether LEG is currently mispriced by the market.
Other Dividend Rockstars: Are there strong dividend payers with better fundamentals out there? Check out our free list of these great stocks here.
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