Emerson Electric Co's Dividend Analysis
Exploring the Sustainability and Growth of Emerson's Dividends
Emerson Electric Co (NYSE:EMR) recently announced a dividend of $0.53 per share, payable on 2024-03-11, with the ex-dividend date set for 2024-02-15. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Emerson Electric Co's dividend performance and assess its sustainability.
What Does Emerson Electric Co Do?
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Emerson Electric sells automation equipment and services under two segments: intelligent devices and software control. Within software and control, it also holds a majority interest in AspenTech, an industrial software business, and owns a test and measurement business that was formerly National Instruments. Intelligent devices also holds Emerson's tools business, which boasts several household brands, like Ridgid. Emerson's automation business is most known for its process manufacturing solutions, which consists of measurement and analytical instrumentation, as well as control valves and actuators, among other products and services. Nearly half of the firm's geographic sales come from the Americas.
A Glimpse at Emerson Electric Co's Dividend History
Emerson Electric Co has maintained a consistent dividend payment record since 1957. Dividends are currently distributed on a quarterly basis.
Emerson Electric Co has increased its dividend each year since 1957, earning it the prestigious title of a dividend king. This accolade is reserved for companies that have managed to raise their dividends annually for at least 50 consecutive years.
Below is a chart showing annual Dividends Per Share to track historical trends.
Breaking Down Emerson Electric Co's Dividend Yield and Growth
As of today, Emerson Electric Co currently has a 12-month trailing dividend yield of 2.00% and a 12-month forward dividend yield of 2.01%. This suggests an expectation of increased dividend payments over the next 12 months.
Emerson Electric Co's dividend yield of 2.00% is near a 10-year low and underperforms 48.42% of global competitors in the Industrial Products industry. This indicates that the company's dividend yield may not be particularly attractive for income investors at present.
Over the past three years, Emerson Electric Co's annual dividend growth rate was 1.30%. Extended to a five-year horizon, this rate increased to 1.50% per year. Over the past decade, Emerson Electric Co's annual dividends per share growth rate stands at 2.10%.
Based on Emerson Electric Co's dividend yield and five-year growth rate, the 5-year yield on cost of Emerson Electric Co stock as of today is approximately 2.15%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-12-31, Emerson Electric Co's dividend payout ratio is 0.45.
Emerson Electric Co's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Emerson Electric Co's profitability 8 out of 10 as of 2023-12-31, suggesting good profitability prospects. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Emerson Electric Co's growth rank of 8 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and Emerson Electric Co's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Emerson Electric Co's revenue has increased by approximately -1.70% per year on average, underperforming approximately 77.55% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Emerson Electric Co's earnings increased by approximately 5.50% per year on average, underperforming approximately 58.36% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of 2.50%, underperforms approximately 63.31% of global competitors.
Concluding Thoughts on Emerson Electric Co's Dividends
Considering Emerson Electric Co's impressive history as a dividend king, its consistent growth in dividends per share, and a reasonable payout ratio that supports sustainability, the company appears to be a reliable payer for income-focused portfolios. However, its current yield is near a 10-year low, and growth metrics show mixed results when compared to industry peers. Investors should weigh the company's strong profitability and commitment to dividends against these factors. Value investors interested in stable dividend income might still find Emerson Electric Co an attractive option, especially when considering the potential for future growth in a recovering global economy.
GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
