The company’s last dividend increase was in November 2011 when the Board of Directors approved a 15.90% increase to 40 cents/share. Emerson Electric ‘s largest competitors include Roper Industries (ROP), Cooper Industries (CBE) and Ametek (AME).
Over the past decade this dividend growth stock has delivered an annualized total return of 8% to its shareholders.
The company has managed to deliver 11.10% in annual EPS growth since 2002. Analysts expect Emerson Electric to earn $3.49 per share in 2012 and $3.98 per share in 2013. In comparison Emerson Electric earned $3.24/share in 2011.
The company’s strategy for long-term growth is focused on product innovations, strategic acquisitions and growing its presence in emerging markets. The company is focusing on emerging markets growth, and expects to increase the portion of emerging market sales to 45% of overall revenues in five years. The company’s fortunes are dependent on the economic cycle. However, as the global economy expands, its sales should increase over the next few years
The company has managed to maintain a consistently high return on equity over the past decade. Rather than focus on absolute values for this indicator, I generally want to see at least a stable return on equity over time.
The annual dividend payment has increased by 6.60% per year over the past decade, which is lower than to the growth in EPS.
A 7% growth in distributions translates into the dividend payment doubling almost every six ten years. If we look at historical data, going as far back as 1983 we see that Emerson Electric has managed to double its dividend every nine years on average.
Over the past decade, the dividend payout ratio has been on the decline, falling from a high of 65% in 2003 to 42.60% in 2011. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.
Currently Emerson Electric is attractively valued at 15.10 times earnings, has a sustainable dividend payout and yields 3.40%. I would consider adding to my position subject to availability of funds.
Full Disclosure: Long EMR