Founded in 1895, Lennox makes heating, ventilation, and air conditioning for commercial and residential markets, and refrigeration products for food and data systems, in the United States, Canada, and internationally. Its products are sold through direct sales, distributors, and company-owned parts and supplies stores. Lennox is headquartered in Richardson, Texas. Lennox comes in at #10 out of our top twenty dividend growth stocks.
Lennox International Inc (LII) is Fully Certified, passing ALL Dividend System criteria. It has ‘Premier’ status being in the upper percentiles of this month’s stock universe. The company increased dividends for 21 years, making it a Dividend Contender 10+. We consider LII to be a Growth stock.
GROWTH: LII’s 5-year average dividend growth rate is 18.6%, wonderfully high versus the dividend universe average of 12.4%. Free cash flow has grown at an average rate of 15.2% per year for the last 5 years versus the dividend universe at 8.3%, so LII is performing very well.
INCOME: LII’s current dividend yield is 1.13%, less than half of the average at 2.65%.
SAFETY: We use the Dividend Coverage Ratio to measure the dividend’s safety – higher is better. LII has a DCR of 5.2 which is very good, more than double the minimum of 2.
VALUATION: The price at time of analysis was $274.26, which we consider Overpriced. A fair price based on historical PE ratio and earnings would be around $243.34. The S&P500’s average PE ratio is 38.42, versus LII’s PE ratio of 29.68, below the S&P 500 average PE, indicating some value, as compared to our dividend universe. Our ‘Value Rating’ for Lennox International Inc is 2 out of 5.0, meaning that both PS and PE indicate the stock is moderately expensive, compared to other dividend stocks available.
TIMING: Historical Yield and PE tell us that LII has ‘No ‘buy’ signal.’ Don’t eliminate a stock based on one factor (or lack thereof).
QUALITY: Our quality formula gives LII a ‘Quality Rating’ of 3.3 (out of 5), versus the average of 2.7 for this month’s dividend universe.
TOTAL RETURN: Over the last 15 years, the compound annual growth rate for an investment in Lennox International Inc was 16.37% per year with dividends reinvested, versus the S&P500 Total Return of around 11% per year for the same time period. As you can see, LII is doing better than the market with dividends reinvested.
Compared to all dividend stocks paying 7 years or more of increasing dividends, we rate Lennox International Inc a ‘B+.’
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