Leading the Vanguard Windsor Fund, John Neff beat the market by more than three percentage points per year for more than 30 years. That's an incredible track record and the difference between $39,116 and $17,449 on a $1,000 investment, assuming a 10% average return. Here's the master's secret: Two of those three percentage points came from dividends. So while Neff worked hard to buy cheap stocks, dividends were crucial to outsized returns. That's totally cool!

To help find totally cool stocks that offered value and income, Neff used his total return ratio, defined as:

Total return ratio = (analysts' expected earnings growth rate + dividend yield) / price-to-earnings ratio

Neff would compare company ratios to the market's ratio. If a company's ratio was at least 50% greater than the market's, he gave it a look. If Neff's research revealed the market misinterpreted the company's prospects and thus created an opportunity, he purchased shares for the portfolio.

Currently, the market's total return ratio is about 0.95. (I used a Shiller P/E of 20.1, a yield of 2%, and two-year estimated earnings growth of 17.2%.) So to meet Neff's criteria, a company's ratio must be greater than 1.43.

Residential and commercial furnishings manufacturer Leggett & Platt (NYSE: LEG) looks like a company John Neff would consider as a total return opportunity. Let's compare it to the competition.


2-Year Growth Estimate



Total Return Ratio

Leggett & Platt










Sealy (NYSE: ZZ)





Compared to some competitors listed in the table above, Leggett & Platt comes out the clear winner as a total return opportunity. HNI looked like another candidate, but its P/E ratio is too high right now, and mattress-maker Sealy doesn't pay a dividend, cutting it out of our total return picture.

The Foolish bottom line
Neff's total return ratio is beautiful because it combines value and income: cheap stocks with dividend kickers. Investors can profit from multiple expansion while collecting dividend payments along the way. And as Neff showed, done correctly, this strategy can lead to excess returns over the market. As with any metric, Neff's total return ratio is just a starting point. But with a total return ratio of 1.51, Leggett & Platt certainly seems like a totally cool stock to get to know.

Million Dollar Portfolio Associate Advisor David Meier does not own shares of any of the companies mentioned. He does know that Income Investor has plenty of great ideas that can generate excellent total returns. You can take a trial here. The Motley Fool has a disclosure policy.