Manufacturer stocks offer bargains for brave investors
Larry Thomas, Business editor -- Furniture Today, July 13, 2008
Income investors with the patience of Job and the nerves of a bungee-jumper may want to take a second look at the stocks of several furniture manufacturers — a sector that has been dissed by just about everyone else on Wall Street.
No, I'm not a securities analyst and I don't play one on TV, but the utility-like dividend yields sported by more than a half-dozen companies may be ripe pickings for the adventurous, above-mentioned souls.
Three publicly-traded companies — Ethan Allen, Sealy and Stanley — had yields of more than 3.5% last week, while Tempur-Pedic and Flexsteel topped 4%.
Two others, Leggett & Platt and Masco, exceeded 6% and the highest of them all, Bassett Furniture Inds., was yielding more than 7%, even excluding a special dividend announced in April.
A company's dividend yield, calculated by dividing the annual dividend by the stock price, is subject to change as prices rise and fall. Those fat yields are sure to tempt some who have been frustrated by the recent stock market slump.
But there's always the risk of losing some or even all of your original investment if the stock price falls. We all know that furniture stocks have been pummeled for the past year. (All of the stocks mentioned earlier, except Bassett, are trading near their 52-week lows.)
Still interested? Also consider the very real risk that the dividend could be cut. Earlier this year, La-Z-Boy slashed its quarterly payout from 12 cents to 4 cents per share, while Furniture Brands made an even bigger cut, going from 16 cents to 4 cents per share.
That pushed La-Z-Boy's yield below 3% and Furniture Brands' below 2% — although many stock quotation services quote a significantly higher figure because they calculate it using the total dividend paid in the trailing 12 months, rather than the current annual rate.
But on the other hand, Leggett & Platt and Bassett each have raised their payouts in recent months.
Leggett, in fact, jacked its quarterly dividend from 18 cents to 25 cents per share in last year's fourth quarter as part of massive restructuring effort. And the company proudly notes that its dividend has approximately doubled every five years for the last four decades, and has been raised in 45 of the last 46 years.
In March, Bassett increased its quarterly dividend from 20 cents to 22.5 cents per share. And perhaps more importantly, the company announced in April that it would pay a special one-time dividend of $1.25 per share buy selling off a portion of its sizable investment portfolio.
The first installment of 75 cents per share will be paid Aug. 1 to stockholders of record July 16. The remaining 50 cents per share will be paid in October.
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