Bert’s Recent Buy – Leggett & Platt, Inc. (LEG)

2018 has been a fun investing year, as the market has presented many great buying opportunities and I’ve been fortunate enough to have some extra capital on to capitalize.  At the beginning of May, I initiated a large position in Pepsi.  Selfishly, I was trying to sneak in one more stock purchase before the end of the month and was fortunate enough to have cash on hard, ready to delpoy.  I have been hot on the trail of a Dividend Aristocrat for the last few weeks.   Finally, after weeks of waiting,  the company’s stock price fell and triggered my limit order.  Here is why I initiated a position in Leggett & Platt, Inc. (LEG) at the end of May!

the company – Leggett & Platt (LEG)

Leggett & Platt, Incoporated (LEG) was founded in 1883.   The company’s humble beginnings involved the design and manufacturing of beds.  In 2018, the company has expanded past their bedding roots and now is the leading US manufacturer of bedding components, automotive seat support and lumbar systems, home furniture and work furniture components, flooring underlayment, high-carbon drawn steel wire, and bedding industry machinery (source: LEG Investor Fact Sheet May 2018).

I actually do not have a lot of manufacturing companies in my portfolio.  What attracted me to LEG over other companies is the segment diversification and the company’s strength within each of these segments.   Having exposure in residential, industrial, and the automotive segments should allow the company to continue to perform well when one of the sectors has a pullback.

The company popped on my radar after a couple of events.  When I was preparing the May edition of my monthly “Expected Dividend Increase” series, I noticed that Leggett & Platt was expected to increase their dividend during the month.  I hadn’t performed much research over LEG, but I noticed the company was yielding over 3% and was a Dividend Aristocrat.  But honestly, I didn’t think too much of it at the time.

Then, one day a few weeks later, Lanny and I were having one of our infamous water cooler conversations that started as follows: “What stocks are on your radar?”  Lanny always has an answer to this question, and he mentioned that he wanted to look more into Leggett & Platt because the company was a Dividend Aristocrat and was down over 10% year-to-date at the time.  I left that conversation with a full glass of water and very excited.  That night, I performed my own research.  The rest was history.

Dividend Diplomats’ Stock Metrics – Leggett & Platt

After my conversation with Lanny, I did what we always do before each investment decision.   Run LEG through our infamous stock screener to determine if the company was considered an undervalued dividend growth stock.   Here are the results of the screener.

  1. Price-to-Earnings Ratio (P/E Ratio) –  Assuming forward EPS of $2.66/share, the company’s P/E ratio was ~15.50X at the time of purchase.  This is well below the broader market.  Boom, passes this metric.
  2. Dividend Yield –  With an annual dividend of $1.52/share, LEG’s dividend yield at the time of purchase was  3.68%.  This was great to see and was above my portfolio’s overall yield of 2.96%.  Obviously I was excited to increase my portfolio’s dividend yield.
  3. Dividend Growth/History.  The company is a Dividend Aristocrat, so they instantly check-off this metric.  But the fact the company has increased their dividend for 47 consecutive years is insane.  The company’s 47th consecutive increase was announced in May.  Management increased their quarterly dividend from $.36/share to $.38/share, a 5.6% increase.  It was actually funny and a strange coincidence.  The dividend increase was actually announced the same day as our water cooler conversation.  However, neither of us had a clue at the time that the increase was announced.
  4. Dividend Payout Ratio – After the company’s dividend increase, their dividend payout ratio was 57%.  once again, LEG passes our screener as this is below our 60% target payout ratio.
  5. 5-year Average Dividend Growth Rate –  The company’s yield is well above 3%, so I am not expecting LEG to have a high dividend growth rate.   The company’s 4/61% 5-year dividend growth rate was good, but not great.  However, with all the other positives, this was not going to deter me from making the purchase.
  6. Dividend Payment Date –  Personally, I was excited about one fact that is not a part of our screener.  But in my quest to improve cash flow in the first and second month of a quarter (since so many companies pay a dividend in the third month), I was excited to see that LEG pays their dividend in the first month of the quarter!

The Purchase & Summary

Clearly, LEG passed our stock stock screener and I was ready to purchase shares.  The company’s stock price was trading at ~$42/share at the time of the decision (middle of May).  The company’s ex-dividend date was not until June 14, 2018, so I had some time before I had to make a purchase to capture the July dividend.  My target price was $41.57/share because this would allow me to purchase the next additional share with the capital I have available.

This is where I did something a little uncharacteristic.   Typically, I would have purchased shares at the time and called it a day.  But I borrowed a little bit of Lanny’s Italian stubbornness and set a limit order for 67 shares at $41.25/share.   Finally, after many days of waiting, a few close calls, and now, a few extra gray hairs, my order filled on May 29, 2018.

In total, I purchased 67 shares of Leggett & Platt.  This purchase added $101.84 in forward dividend income to my total forward dividend income.   All in all, it was worth the wait and I couldn’t be happier with my investment decision.  Now, I can’t wait to receive that first dividend check in July!

What do you think of my purchase?  Are you adding shares of Leggett & Platt as well?  Is the company on your dividend stock watch list?  If not, why?  I can’t wait to read your comments!

-Bert

DISCLAIMER: I DO NOT RECOMMEND ANY DECISION TO THE READER or ANY USER, PLEASE CONSULT YOUR OWN RESEARCH.   THANK YOU FOR YOUR UNDERSTANDING.
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30 thoughts on “Bert’s Recent Buy – Leggett & Platt, Inc. (LEG)

  1. Damn Bert…you’re killing it on the forward income additions! Congrats on another nice, chunky purchase.

    Admittedly, I’ve heard of LEG but did NOT have this on my watch list [goes to Robinhood, searches ‘LEG’, clicks ‘add to watch list’]…

    Overall, looks like a very good purchase based on the details you outlined. Good stuff! – Mike

  2. Hi Bert,

    nice one! – 67 shares of Legget & Platt after 40 shares of PEP is another big purchase for the month, wow! You are crushing it in May!!
    I’ll look into LEG and do my research, until now they were not on my radar.

    Right now i like Kraft-Heinz after the price decline. I think they offer good value and with a yield north of 4% it’s attractive for income investors too.
    And maybe Tanger Factory Outlets…

    Keep it up!
    DividendSolutions

    • Dividend Solutions.

      Thank you so much! It has been a fun month, that’s for sure. I’m having a lot of fun making these chunky positions here. KHC is a very interesting case right now and one that I have been looking into more recently. Lanny did some research for me that I’ve been leveraging. The yield is definitely nice right now. I drove past a Tanger Outlets a few weeks ago. What are you seeing with this stock?

      Bert

      • in my opinion Tanger is a bit speculative, but offers a good risk/reward ratio. I don’t see a dividend cut around the corner and with a yield like that, a small position in Tanger would fit for my portfolio in the long term. Right now my REIT percentage is high and i want to change that first.

  3. As I have all aristocrats in a seperate watchlist I have been eying LEG as well as a few others. I have not pulled the trigger yet because I wanted to diversify in utilities to which I have (had!) no exposure. So my first buy of the month (yes a second ons is coming!) is already done.

    Based on your metrics its a great choice!

    • Mr Robot,

      I like your Aristocrats watch list idea. What other Aristocrats are on this listing? I like the “had” comment as well and I’m sensing a nice dividend stock purchase article coming soon. I’m excited to read about your purchases and then your eventual second purchase.

      Bert

  4. I like the purchase Bert. I owned LEG a few years back. I initiated a small position and the stock went on a little run. That combination of lower yield and relatively small annual increases at the time led me to sell it. It’s not that I didn’t like the stock/company, but I had to many holdings at the time and was looking to consolidate some positions. I haven’t looked at it since, but your metrics look good. I also like LEG as a diversification play from the typical dividend paying industries (staples, utilities, REITS, etc.) Thanks for highlighting your recent buy. Tom

    • Tom,

      Understandable reasons to sell. The beauty of it is how things change over time, right? Plus, I’m sure your consolidation resulted in you investing in another kick-ass dividend growth stock. Great point about diversification and it was definitely nice to expand the sectors that I hold stock.

      Bert

  5. Nice one Bert, I’m not too familiar with this company but an aristocrat yielding north of 3% is always a positive sign! You are doing some serious work for your forward income lately, keep it up!

    DI

  6. Hey Bert. Thanks for this excellent summary and analysis. I’ve owned LEG since 2012. I like that it is a bit under the radar, And I’m not surprised that it passed all of your criteria with flying colors.

    The stock went up quite a bit after I purchased it, and I did not add shares because I thought it was overvalued for a long time. Now that it has come back down to earth, I will be adding shares as soon as I get the capital.

    • FIREman,

      Of course, I am always glad to take a look at a stock and analyze it further. I’m glad that you are a fellow shareholder. Honestly, prior to this year, I had never thought about investing in the company. It caught me off guard how well it performed in our screener and my ears instantly perked up haha I’m excited to read about the purchase in your next article.

      Take care,

      Bert

  7. Gotta love an aristocrat with recent 5%+ increases! I don’t own LEG but they fall into my requirements as well. It would be nice to increase the overall portfolio yield a bit. Congrats!

  8. They are a great company. I actually just got off of the phone with them. I initiated a position a few weeks ago as well. I work for a flooring company in Columbia, MO and we get all of our pad through Leggett & Platt, typically a few large orders per month. Given their diversity, high current dividend yield and 47 years of dividend growth I’m happy to add them to my portfolio.

    • Mark,

      Thanks for the comment. I like the fact that your company uses them for their supplies and that is a great sign about the companies reach and the quality of their product. Also, it is nice to call you a fellow shareholder and I’m happy to hear that they checked all of your investment boxes as well.

      Take care,

      Bert

  9. Bert,
    That is a huge buy. I want to double my stake in them as well. Their history, industry, and projections are great. Hard to ignore consistency and success like that.
    – Gremlin

  10. Bert,
    I bought a few shares of LEG back in 2014 but somehow I had not realized until your post that the stock was back into watch list candidate! Thanks it’s now on the list and I am now tempted to add on to my position soon. Like you I also like that it pays in Jan/May/July/Oct months – I need more income on these months for an optimal distribution of income 🙂 !
    Thanks

    • Glad I could help you find a company to add to your watch list 🙂 The income distribution is going to be very nice and I cannot wait to write my July Dividend income summary because of it.

      Bert

      • Hey Bert! Actually have added to LEG right away – kind of skipped the watch list on this -ah…
        Thanks for pointing out the stock as current levels. I have updated my blog with this purchase among others 🙂
        PS: I am hoping to make it to your list of dividend income bloggers this month!

        Cheers

  11. Hey Bert,

    I made a Google sheet with all recent Aristocrats from the David Fisher list. Then I automated variables like price, ex div date, yield, 52wk low and 52wk high and % off these numbers. So that gives me a quick aristocrat menu at a glance.

    And you’re right, look for my post because I made a double whammy 😉

  12. Hey, Bert. I like the patience you exhibited in letting the stock price come to you… always so hard to do. You even got to secure a price a little lower than you were willing to pay… nice!
    LEG is not currently on my watchlist, but I’ve paid attention to the company over the years. I certainly like their dividend increase streak. My main concern is the low sales growth. However, they’ve done a good job of growing earnings despite that. They are reducing the share count over time, too.
    I see the LEG purchase provided over a $100 boost to your dividend income… a sweet addition that powers your portfolio even further forward. You are on a roll, Bert!

  13. Hi Bert,
    Great purchase! I wasn’t aware of this company, but it got my attention now. I wish I had some capital to deploy at the moment…
    I guess I shouldn’t base my purchases based on such things but it would have extended my dividend increases streak by another month, as none of my companies increased dividends during May 😀
    I will keep an eye on the company and will hope for the price to stay at current level for some time.
    -BI

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