- Oops!Something went wrong.Please try again later.
Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Emerson Electric in Focus
Emerson Electric (EMR) is headquartered in St. Louis, and is in the Industrial Products sector. The stock has seen a price change of 2.07% since the start of the year. The maker of process controls systems, valves and analytical instruments is currently shelling out a dividend of $0.5 per share, with a dividend yield of 2.46%. This compares to the Manufacturing - Electronics industry's yield of 0.55% and the S&P 500's yield of 1.44%.
Taking a look at the company's dividend growth, its current annualized dividend of $2.02 is up 1% from last year. Over the last 5 years, Emerson Electric has increased its dividend 5 times on a year-over-year basis for an average annual increase of 1.27%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Emerson Electric's current payout ratio is 58%, meaning it paid out 58% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, EMR expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $3.48 per share, which represents a year-over-year growth rate of 0.58%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that EMR is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Emerson Electric Co. (EMR) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research