Bargain Basement Dividend Aristocrat

Leggett & Platt (LEG) is worth a serious look for all dividend investors:

The 128 year old company has increased its dividend every year for the last 40 years (2nd only to Johnson & Johnson and Lowes).  Dividends have doubled almost every five years and risen at an average annual compound rate of 14%.  The company is buying back almost 10M shares this year, is well-poised for any recovery in consumer demand AND is yielding 5.9% after this week’s market selloff:

 

L&P designs and produces a wide range of components for home, office and autos (e.g. bedding, furniture, fabric, office furniture, dishwasher racks, automobile-seat suspension systems, coated wire, seat belts, etc.).  While the company isn’t immune to a softening economy, these are the kind of products that are well-insulated from a downturn.

From this week’s Barron’s article:

In 2010, L&P earned $1.15 a share on $3.4 billion in revenue. “When demand improves,” said CEO David S. Haffner, “given our spare production capacity, our sales can rebound to nearly $4.5 billon without the need for significant investment in plant expansion. As a result, we have meaningful operating leverage that should benefit future earnings.”

Going forward, commodity costs and consumer demand will present some headwind for growth for L&P, however the company has shown its ability to raise prices in its segments, grow revenues and continue demonstrate shareholder friendly practices (grow dividends and buyback shares).  Another excellent candidate for a DRIP.

 

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