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 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Biggest Airports in the World

The 5 Most Gang Infested Cities In America

The 34 Smartest Countries in the World

The 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

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!