Earlier this year, Leggett & Platt’s dividend looked to possibly be in peril due to the COVID-19 pandemic.
Organic sales in the second quarter plunged 31% as stores closed and plants idled, and the firm was on the brink of breaching a financial covenant limiting its leverage.
In May, Leggett worked with its banks to amend its covenants and achieve greater flexibility to manage through the downturn. This included retaining its ability to continue paying dividends.
However, we noted that another Dividend Safety Score upgrade was unlikely until Leggett’s leverage fell and the pandemic’s longer-term impact on consumer spending became clearer.
With another quarter now in the books, Leggett’s diversified business has staged an impressive recovery, resulting in material improvements to the firm’s leverage profile and payout ratio.