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Leggett & Platt’s Record Cash Flow Strengthens Dividend Safety Profile

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 [...]

November 23rd, 2020|

V.F. Corp’s Impressive Digital Growth Returns Confidence in Dividend

Last spring, we downgraded V.F. Corp’s Dividend Safety Score from Safe to Borderline Safe. Mandated store closures and anxious shoppers led to a sharp decline in revenues across the industry.  The revival for retailers was uncertain as the severity and length of the pandemic was not clear.   V.F. Corp's cash flow no longer covered its dividend, leading us to wonder if management would follow many of its peers and consider temporarily suspending the payout to preserve capital out of an abundance of caution. However, amidst the uncertainty, V.F. Corp elected to use its strong balance sheet and access to liquidity to maintain its dividend.   Now nine months into the crisis, V.F. Corp is demonstrating progress in its recovery. Although revenues were down 18% last quarter, that is [...]

November 20th, 2020|

Amazon Launches Online Pharmacy; Walgreens’ Dividend Outlook Remains Stable For Now

Shares of Walgreens fell nearly 10% on Tuesday following Amazon's introduction of its new online pharmacy service. Amazon Prime customers can now order prescriptions for home delivery within a couple of days. Amazon stocks most brand name and generic medications, works with most insurance plans, and will have pharmacists available 24/7 by phone. Besides trying to offer greater convenience, Amazon will make it easier for customers to choose the lowest price option by comparing their insurance co-pay and the price without insurance, after including Amazon Prime's prescription savings benefits. To get started, Amazon Prime members need to answer a handful of questions about their current medications and health conditions. They can then get their prescription on file with Amazon by contacting [...]

November 18th, 2020|

Solid Rent Collection, Additional Federal Support Help NHI’s Outlook

National Health Investors (NHI) has had an Unsafe Dividend Safety Score since May, reflecting the risks posed by its high exposure to senior housing (70% of rental revenue). While NHI does not operate any of its properties, providing some cash flow insulation as long as tenants continue paying rent, many of the REIT's senior housing tenants entered the year with low rent coverage ratios (i.e. cash flow to rent expense). COVID-19 has further strained the financial health of these operators. Labor and equipment costs have increased to protect the vulnerable senior population, and occupancy has declined to historic lows as move-in activity freezes. Further complicating NHI's outlook, the firm's four largest tenants generate over 50% of the REIT's revenue. This increases risk [...]

November 14th, 2020|
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