Recent Buy - Leggett & Platt Inc (LEG)

I must admit I was pretty excited when I checked the market this past week and saw that Leggett & Platt (LEG) was trading down > 7% after their earnings release.  Apparently, Mr. Market not too happy to hear management revise guidance lower for 2018.  The latest earnings presentation for Q3 2018 can be seen here and corresponding press release can be read here. Despite the revised EPS guidance for the current year, the company's decline in valuation leaves investors paying a Forward P/E ratio of less than 15x, which is a very reasonable valuation for this industrial company that is also very shareholder oriented.  See below for additional details on this purchase.

Purchased: 56 shares x $35.65 = $2,052.40 (+$0 commission)

Dividend Income: $85.12 ($1.52/sh; paid quarterly in Jan, Apr, Jul, and Oct)

Forward P/E ratio: 14.5 Forward P/E vs. S&P @ 16.4

Debt to capital < 50%: No, 56%

Interest coverage ratio of at least 3:1: Yes, 8.3x

S&P and/or Moody's credit rating of BBB+/Baa1 or better: Yes, BBB+/Baa1

Current dividend yield > 1.5x S&P yield: Yes, 4.2% vs. S&P @ 1.95%

Payout ratio < 60% (or <85% for utilities): Yes, 51.5%

Dividend King or CCC classification: LEG is a dividend aristocrat - has increased the annual dividend rate for 47 years.

Comments: This company is well known among the DGI community due to is status of dividend aristocrat (1 of 53 S&P 500 Aristocrats) and recently got my attention when it slid below $40.  This industrial along with ITW, which is also trading at a reasonable valuation in my opinion, are two companies I've long wanted to add to my portfolio but have been awaiting more favorable valuations.  As I referenced above, the company's management is shareholder oriented and has outlined its top priorities for the use of operating cash flows when the CEO recently emphasized "the company's top priorities for use of cash remain organic growth, dividends, and strategic acquisitions. After funding those priorities, the company generally intends to repurchase its stock (rather than repay debt early or stockpile cash). Management has standing authorization from the Board of Directors to buy up to 10 million shares each year; however, no specific repurchase commitment or timetable has been established."  I am looking forward to being a long time owner of this quality company. 

Company Profile: Leggett & Platt, Inc. engages in the manufacture and distribution of furniture and engineered components; and products among homes, offices, automobiles, and commercial aircraft. It operates through the following business segments: Residential Products, Industrial Products, Furniture Products, and Specialized Products. The Residential Products segment comprises of bedding, fabric and carpet cushion, and machineries. The Industrial Products segment includes drawn wire, wire products, and steel rod. The Furniture Products segment consists of home furniture, work furniture, and consumer products. The Specialized Products segment offers automotive, aerospace, and commercial vehicle products. The company was founded J. P. Products and C. B. Platt in 1883 and is headquartered in Carthage, MO.