This Former Dividend King Just Agreed to Be Bought Out.

Dividend investors person watched reliable income streams travel nether unit lately arsenic inflation, softer demand, and balance-sheet strain unit pugnacious choices adjacent astatine established payout growers. In 2024 alone, 3 erstwhile Dividend Kings -- Walgreens Boots Alliance, Leggett & Platt (NYSE:LEG), and 3M (NYSE:MMM) slashed their dividends.

Walgreens aboriginal accepted a buyout from private-equity steadfast Sycamore Partners -- completed past August --and present Leggett & Platt has taken a akin step: it agreed contiguous to beryllium acquired by Somnigroup International (NYSE:SGI) successful a $2.5 cardinal all-stock transaction. The deal, announced this morning, lets Leggett shareholders commercialized their shares for 0.1455 shares of Somnigroup banal and ain astir 9% of the combined company.

A Dividend King earns its crown by raising its yearly payout for astatine slightest 50 consecutive years. The barroom is precocious due to the fact that it demands dependable currency flow, disciplined superior allocation, and a committee committed to shareholders twelvemonth aft year. Leggett & Platt held that rubric with 52 consecutive years of increases earlier 2024. That streak signaled a institution that consistently generated capable escaped currency to reward owners without overextending.

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Simply put, though, the crown is nary warrant of permanence. High yields tin disguise occupation erstwhile net weaken. Leggett's payout ratio had climbed supra 128% heading into its cut, and erstwhile currency procreation lags, adjacent kings indispensable take betwixt preserving the dividend oregon protecting the equilibrium sheet. Investors learned this the hard mode successful 2024 erstwhile 3 longtime payers trimmed payouts to escaped up capital.

Almost precisely 2 years ago, Leggett & Platt reported first-quarter income of $1.1 billion, down 10% year-over-year, with adjusted EPS falling to $0.23 from $0.39. The committee responded by slashing the quarterly dividend 89% -- from $0.46 to $0.05 per stock (where it stands today) -- for Q2 2024. Full-year 2024 dividends dropped to $0.61 per stock from $1.82 the anterior year, arsenic absorption directed the savings toward deleveraging; nett indebtedness stood astatine 3.61 times trailing adjusted EBITDA astatine the time.