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This Furniture Retailer Furnishes Its Owners With a Nice Yield

Haverty Furniture Cos., aka Havertys, has paid a cash dividend every year for more than eight decades and occasionally surprises shareholders with a special payout.
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Amid the recent trade war headlines and market volatility it can be easy for income- seeking investors, and other ones as well, to miss company press releases that announce a fresh dividend increase. Some increases are expected given a company's dividend track record, such as those by the Dividend Kings or Dividend Aristocrats, but others can offer a positive surprise. One such case is the recent dividend increase announced by furniture and home furnishings company Haverty Furniture Cos. (HVT) , more commonly known as Havertys.

Here's what the company shared:

"The board raised the dividend on the company's common stock 11% from $0.18 per share to $0.20 per share. The quarterly dividend for the company's Class A common stock was also increased from $0.17 per share to $0.19 per share. The dividend is payable on September 11, 2019, to stockholders of record at the close of business on August 26, 2019. Havertys has paid a cash dividend in each year since 1935."

You'll notice that last part -- that Havertys has paid a cash dividend every year since 1935, but yet it's not a Dividend King or Dividend Aristocrat, nor is it a Dividend

Contender. Rather, Havertys sporadically has increased its quarterly dividend and in some years the company also has declared a special dividend, as it did in the December 2018, December 2016 and September 2014 quarters. Each of those special dividends were payments of $1.00 per share that were likely warmly greeted by shareholders.

That was the past, and we'll need to see if Havertys announces such a special dividend in 2019, but investors interested in firms with higher dividend yields need not wait for such an announcement by the company. That's because the recent quarterly dividend increase popped the company's current dividend yield to roughly 4.4%.

Generally speaking, a dividend increase like that would lead to the corresponding rise in a company's shares, but when we look at Havertys we see its annual revenue started declining year over year in 2017, continued in 2018 and has done the same for the first half of 2019. Despite the declines the company has continued to generate positive cash flow during those periods, and annualized cash flow generated during the first half of 2019 should cover the new annual dividend to common shareholders. That annual payment is roughly $16.5 million, and the good news is that cash on the company's balance sheet could support up to three years of such dividend payments, free cash flow notwithstanding.

My suggestion would be that investors hungry for dividend yield should scoop up HVT shares, but don't fall asleep at the switch with this one. Be sure to monitor not only the speed of the domestic economy, but also inroads by Amazon.com Inc. AMZN and others into the furniture and home furnishings business. If the domestic economy slows substantially further we could see consumers dial back their spending, and with furniture being relatively large ticket items such purchases could be among the first to be cutback. With Amazon, it is leveraging its Prime service as well as its push into private labels to tackle the home furnishing market. This is a relatively new effort, but given that Amazon has altered industry landscapes before, it bears watching.

At the time of publication, Versace had no positions in the stocks mentioned.