Family Dollar Stores, Inc. (FDO), Leggett & Platt, Inc. (LEG): Danger Ahead With These Dividend Aristocrats!!

Page 1 of 2

Family Dollar logoIt seems like everyone is screeching after yield buying up consumer staples, REITS, and even student loan backed securities. Dividend Aristocrats, those companies that have steadily raised their dividend for 25 years or more, have been go-to stocks for those yearning for yield. But…not every aristocrat is created equal.

Three names that require caution are Family Dollar Stores, Inc. (NYSE:FDO)Leggett & Platt, Inc. (NYSE:LEG), and McCormick & Company, Incorporated (NYSE:MKC). Investors need to consider would they want to be in these names if there weren’t any yield.

Caution ahead

A name I wrote a SWOT analysis on in the past was Leggett & Platt, Inc. (NYSE:LEG), which operates as a diversified manufacturer of furniture and mattress innards, springs and such, as well as making automotive and aerospace seating and components and retail furnishings, shelves, display units. As a double play on both a housing and auto industry resurgence the market has taken it up 35.23% in the last year. The shares hit a 52 week high on March 4 and trade at an 18.21 P/E. Of more concern is the yield at 3.80% at a 67% payout ratio.

The main reasons to worry about Leggett & Platt, Inc. (NYSE:LEG) going forward are twofold. One of their biggest clients has been J.C. Penney Company, Inc. (NYSE: JCP) as they buy Leggett & Platt, Inc. (NYSE:LEG)’s products to refurbish their stores. With a client like J.C. Penney, although it just renegotiated some lines of credit, there is risk their turnaround strategy will get overturned and Leggett & Platt will be holding the bag with future orders canceled.

J.C. Penney’s orders were responsible for buoying Leggett & Platt’s Commercial division sales numbers from being what would have been flat to below average sales. The stores do indeed look much better and brighter thanks to Leggett & Platt, Inc. (NYSE:LEG), but with J.C. Penney stock hitting new 52 week lows almost daily the desperation of JCP management to do something to improve their outlook is a red flag.

The second concern is that the mattress stocks have been whipsawed lately with no consensus whether people are willing to make a fairly pricey purchase especially if their current bedding is less than 10 years old. They don’t call mattresses consumer durables for nothing…they’re supposed to last.

Other things that worry me are the short interest at 7.20% which seems high for a Dividend Aristocrat and the level of debt which also bothers Fool Dan Caplinger. He also mentions the company’s dividend growth is less than 10% and their revenue growth at 2.3% is not encouraging. Finally, the company has two competitors that are threats: bigger Genuine Cast Parts and nimbler Flexsteel Industries, Inc. (NASDAQ: FLXS) are both giving Leggett & Platt, Inc. (NYSE:LEG) a run for the money.

Don’t go through a red light

One company that could do with some Leggett & Platt refurbishing is Family Dollar. The stores are tired-looking and the stock is exhausted, down more than 20% from its June 24 high of $74.73. This stock is only up 6.35% over the last year after the dollar store stocks had a great run the early part of last year.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 44 percentage points in 21 months Learn how!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!