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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Leggett & Platt, Incorporated (NYSE:LEG) is about to go ex-dividend in just 3 days. You will need to purchase shares before the 12th of September to receive the dividend, which will be paid on the 15th of October.
Leggett & Platt's next dividend payment will be US$0.40 per share. Last year, in total, the company distributed US$1.60 to shareholders. Calculating the last year's worth of payments shows that Leggett & Platt has a trailing yield of 4.1% on the current share price of $38.98. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Leggett & Platt has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Leggett & Platt
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Leggett & Platt paid out more than half (71%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Dividends consumed 54% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
It's positive to see that Leggett & Platt's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Leggett & Platt's earnings per share have risen 11% per annum over the last five years. Leggett & Platt is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.