Leggett & Platt (NYSE:LEG) Is Increasing Its Dividend To $0.46

The board of Leggett & Platt, Incorporated (NYSE:LEG) has announced that it will be paying its dividend of $0.46 on the 14th of July, an increased payment from last year's comparable dividend. This takes the dividend yield to 5.7%, which shareholders will be pleased with.

View our latest analysis for Leggett & Platt

Leggett & Platt's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Leggett & Platt's dividend made up quite a large proportion of earnings but only 64% of free cash flows. This leaves plenty of cash for reinvestment into the business.

EPS is set to fall by 2.7% over the next 12 months. If recent patterns in the dividend continue, we could see the payout ratio reaching 93% in the next 12 months, which is on the higher end of the range we would say is sustainable.

Leggett & Platt Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $1.16 in 2013 to the most recent total annual payment of $1.84. This means that it has been growing its distributions at 4.7% per annum over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Although it's important to note that Leggett & Platt's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

Our Thoughts On Leggett & Platt's Dividend

Overall, we always like to see the dividend being raised, but we don't think Leggett & Platt will make a great income stock. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for Leggett & Platt that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.