Updated 3/11/25
Lennox International Inc. (LII) may not be the first name that comes to mind when thinking about dividend stocks, but it’s built a strong reputation in the heating, ventilation, air conditioning, and refrigeration (HVACR) industry. The company has a long history of providing reliable climate control solutions, making it a steady player in a space that remains essential regardless of economic conditions.
With a market cap of around $21.5 billion, Lennox has seen strong revenue growth and profitability, thanks to its ability to drive demand and maintain pricing power. While the stock has had an impressive run, recent price swings might offer long-term investors a chance to take a closer look. But for those who focus on dividends, the big question is whether Lennox delivers both consistent income and long-term value.
📊 Key Dividend Metrics
- Dividend Yield: 0.76%
- Annual Dividend: $4.60 per share
- Payout Ratio: 20.19% (leaving plenty of room for growth)
- 5-Year Average Dividend Yield: 1.20%
- Dividend Growth Streak: Over a decade of steady increases
- Ex-Dividend Date: December 31, 2024
- Recent Dividend Payment: January 15, 2025
Dividend Overview
Lennox isn’t known for offering a high-yield dividend, sitting at just 0.76%. That’s not exactly an income investor’s dream, but it does point to a company focused on reinvesting earnings into growth. Rather than prioritizing large dividend payouts, Lennox has been steadily increasing its distributions over time while keeping plenty of cash available for expansion.
The low payout ratio of just over 20% signals that the company could easily continue raising dividends for years to come. Many dividend investors look for stocks yielding 3% or more, but for those who focus on growth rather than immediate income, Lennox’s disciplined approach to payouts could be appealing.
Dividend Growth and Safety
One of Lennox’s strengths is its commitment to gradually increasing its dividend over time. While it doesn’t boast the decades-long track record of some Dividend Aristocrats, the company has reliably boosted payouts, which is an encouraging sign for long-term shareholders.
The payout ratio remains low, meaning the company has no problem covering dividends with earnings. Lennox generates nearly $946 million in operating cash flow, giving it plenty of flexibility to continue rewarding shareholders while investing in business expansion.
Chart Analysis
Price Action and Trend
The stock has been in a steady uptrend for most of the past year, with higher highs and higher lows forming consistently. However, a noticeable shift has taken place in recent months, with price action becoming more volatile. The stock reached a high above 650 before pulling back sharply, dipping below the 50-day moving average, and then attempting to recover.
Right now, the price is hovering around 604.62, which is right near the 50-day moving average. This level has acted as resistance after the recent pullback. The stock dipped below the 200-day moving average briefly but has since rebounded above it.
Moving Averages
The 50-day moving average (orange line) has started to flatten out, which is a sign that momentum is slowing. In strong uptrends, this moving average tends to slope upwards, supporting the price. The fact that the stock has fallen below this level a couple of times and is now struggling to stay above it suggests some hesitation among buyers.
The 200-day moving average (blue line) is still trending upward, which is a positive sign for the longer-term trend. The stock dipped close to it recently but found support, indicating that buyers stepped in at that level.
Volume and Market Participation
Volume has remained steady for most of the year, with occasional spikes during earnings events and major moves. One of the most striking aspects of the chart is a large volume spike near the beginning of 2025. This suggests that institutional players or large funds were either aggressively buying or selling at that time.
More recently, volume has been relatively average, which means there hasn’t been a clear signal of strong accumulation or distribution. For the stock to regain bullish momentum, an increase in buying volume would be needed to confirm a new breakout.
Relative Strength Index (RSI)
The RSI has been moving in a downward trend for the past few months after previously reaching overbought levels. It dipped close to oversold territory but has started to turn higher. This could indicate that selling pressure is easing, and buyers are beginning to step back in. However, the RSI isn’t at extreme levels, so it doesn’t necessarily suggest an imminent major move in either direction.
Recent Price Action and Candlestick Behavior
The last five candles show a mix of price indecision and attempts to push higher. The stock opened at 598.33, reached a high of 624.99, and closed at 604.62. This price range suggests that there was initial buying strength, but sellers stepped in near the highs.
Wicks on recent candles indicate some volatility, with both upper and lower shadows showing tug-of-war action between buyers and sellers. The latest candle closed slightly above the opening price, which suggests some resilience, but it’s not a strong bullish signal either.
Key Levels to Watch
- Support near 590: This is close to the 200-day moving average, where the stock recently found buying interest. If the price drops below this, it could signal a further move downward.
- Resistance around 620-630: This is where the stock has struggled to hold its gains recently. A strong push above this level with high volume would indicate renewed momentum.
- 50-day moving average reaction: The stock is currently right around this level. If it can hold above and use it as support again, it would be a positive sign. If it fails, more downside could be ahead.
Analyst Ratings
Lennox International Inc. (LII) has recently received a mix of upgrades and downgrades from analysts, reflecting different perspectives on the company’s future performance. The consensus price target varies across firms, with estimates generally ranging between 📉 $613.89 and 📈 $640.50, depending on the outlook.
📊 Upgrades
🔼 Barclays upgraded Lennox from Equal Weight to Overweight and raised its price target to $702 from $665. Analysts at Barclays believe that market estimates are too conservative, particularly regarding the company’s margin forecasts for 2025. They argue that worries about pre-buy demand impacts are overstated and expect Lennox to demonstrate stronger growth than what is currently priced into the stock.
🔻 Downgrades
🔽 Mizuho downgraded Lennox from Outperform to Neutral, lowering its price target to $625 from $675. The firm cited expectations of lower earnings in 2025 and 2026, noting that next year could be a transitional period for the company. Mizuho is taking a more cautious stance given potential short-term challenges.
🔽 KeyBanc also downgraded Lennox from Overweight to Sector Weight. While no specific reason was provided, sector downgrades often reflect concerns about valuation or industry-specific headwinds that could weigh on performance.
🎯 Consensus Price Target
The average price target among analysts currently sits at $624.09, with estimates ranging from $545 on the low end to $750 on the high end. Some estimates suggest a slightly higher average of $640.50, with a similar range from $565 to $750. The differing projections highlight varying opinions on how Lennox will navigate its current challenges and capitalize on future growth opportunities.
With mixed analyst sentiment, Lennox International remains a stock that some see as undervalued, while others are cautious about potential hurdles in the next few years.
Earnings Report Summary
Lennox International wrapped up 2024 on a strong note, delivering solid financial results in the fourth quarter. The company pulled in $1.3 billion in revenue, marking a 16 percent jump from the same time last year. That growth was largely fueled by a 22 percent increase in core revenue, thanks to strong sales volumes and smart pricing strategies.
Profitability was another bright spot. Operating income came in at $245 million, up 32 percent year-over-year, while the operating margin improved to 18.2 percent, a healthy boost of 220 basis points. Lennox also saw a 41 percent jump in adjusted segment profit, hitting $248 million, with margins improving due to a mix of higher sales and better pricing.
At the bottom line, net income landed at $198 million, translating to earnings per share (EPS) of $5.52—a sharp rise from the $4.04 EPS recorded in the same quarter last year. On an adjusted basis, EPS climbed 54 percent to $5.60, reinforcing the company’s strong financial momentum.
Breaking things down by business segment, home comfort solutions was a standout, generating $887 million in revenue, up 25 percent from last year. Profitability in this division surged 67 percent to $193 million, with margins expanding as Lennox benefited from strong demand, price improvements, and more efficient operations.
The building climate solutions segment also posted solid results, with revenue up 17 percent to $458 million. Organic revenue within this unit rose 14 percent to $448 million. However, despite an increase in segment profit to $99 million, profit margins dipped slightly due to ramp-up costs tied to a new commercial factory.
For the full year, Lennox reported $5.3 billion in total revenue, representing a 7 percent increase from the previous year. Operating income topped $1.0 billion, up 31 percent, and net income came in at $807 million, pushing EPS to $22.54—a big step up from $16.54 per share in the prior year. Adjusted EPS saw a 26 percent increase, coming in at $22.58.
Cash flow also looked strong. The company generated $332 million in operating cash flow in the fourth quarter, up from $306 million last year. Lennox also spent $60 million on capital expenditures, trimming it down from $125 million in the same period a year ago. On top of that, the company continued rewarding shareholders, repurchasing $41 million worth of shares.
All in all, Lennox closed out the year with solid growth, improved margins, and strong cash generation, putting the company in a good position heading into 2025.
Financial Health and Stability
Lennox is in strong financial shape, but there are some aspects worth keeping an eye on.
- Revenue grew 16.5% year-over-year, showing solid demand.
- The company maintains a 15.1% profit margin, which is healthy for the industry.
- Operating cash flow sits at $945.7 million, indicating strong cash generation.
- Debt levels are higher than ideal, with $1.49 billion in total debt.
- The debt-to-equity ratio is 175%, which is something to watch closely.
While Lennox generates plenty of cash, its higher debt levels could become a concern if borrowing costs rise. However, with a return on equity of 142%, it’s clear the company has been putting that debt to good use, efficiently generating returns for investors.
Valuation and Stock Performance
Lennox has performed well in the market, but it’s not exactly a bargain.
- The stock trades at 26.8 times earnings, a premium valuation.
- Forward P/E is slightly lower at 26.1, suggesting steady earnings growth.
- The PEG ratio of 2.30 indicates that the stock isn’t cheap based on expected growth.
- The price-to-sales ratio sits at 4.05, above what’s typical for industrial companies.
The stock is down 4.17% today, but over the past year, it has climbed significantly. With a 52-week high of $682.50 and a low of $445.63, Lennox has seen strong movement. The 50-day moving average of $616.15 and the 200-day moving average of $590.83 suggest that the recent dip could be an opportunity for long-term investors to step in.
Risks and Considerations
While Lennox is a strong company, there are always risks to consider before making an investment.
- Valuation concerns – At 26 times earnings, the stock isn’t cheap. Any slowdown in revenue growth could put pressure on the share price.
- Debt levels – A debt-to-equity ratio of 175% means the company is operating with significant leverage. If borrowing costs rise, this could impact profits.
- Economic sensitivity – While HVAC demand remains steady, Lennox still has exposure to housing and commercial construction cycles. A downturn in these industries could affect sales.
- Low dividend yield – Investors focused on dividend income may prefer higher-yielding options elsewhere.
Despite these risks, Lennox’s strong cash flow and pricing power should help it navigate most challenges.
Final Thoughts
Lennox isn’t the kind of stock that dividend investors flock to for high yields, but it is a company with a solid business model and a track record of steady dividend growth. Its ability to generate cash and reinvest in its business while maintaining a sustainable dividend makes it appealing for long-term investors who value stability.
The high valuation and rising debt levels are points to monitor, but for those who prioritize dividend growth over immediate yield, Lennox remains a company worth considering. It’s more of a long-term compounding play rather than a pure income-generating stock.
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