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Just Four Days Till Emerson Electric Co. (NYSE:EMR) Will Be Trading Ex-Dividend

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Simply Wall St
·3 min read
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Emerson Electric Co. (NYSE:EMR) stock is about to trade ex-dividend in four days. You will need to purchase shares before the 11th of February to receive the dividend, which will be paid on the 10th of March.

Emerson Electric's next dividend payment will be US$0.51 per share, on the back of last year when the company paid a total of US$2.02 to shareholders. Calculating the last year's worth of payments shows that Emerson Electric has a trailing yield of 2.3% on the current share price of $86.11. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Emerson Electric

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Emerson Electric paid out 58% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Thankfully its dividend payments took up just 41% of the free cash flow it generated, which is a comfortable payout ratio.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That explains why we're not overly excited about Emerson Electric's flat earnings over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Emerson Electric has delivered an average of 4.2% per year annual increase in its dividend, based on the past 10 years of dividend payments.

The Bottom Line

Is Emerson Electric worth buying for its dividend? The payout ratios appear reasonably conservative, which implies the dividend may be somewhat sustainable. Still, with earnings basically flat, Emerson Electric doesn't stand out from a dividend perspective. To summarise, Emerson Electric looks okay on this analysis, although it doesn't appear a stand-out opportunity.

If you want to look further into Emerson Electric, it's worth knowing the risks this business faces. Our analysis shows 3 warning signs for Emerson Electric and you should be aware of them before buying any shares.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.