Assessing the Sustainability and Growth of EMR's Dividends
Emerson Electric Co (NYSE:EMR) recently announced a dividend of $0.53 per share, payable on 2023-12-11, with the ex-dividend date set for 2023-11-16. 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.
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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 Electric'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.
Emerson Electric Co's Dividend Analysis
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. The stock is thus listed as a dividend king, an honor that is given to companies that have increased their dividend each year for at least the past 66 years. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Emerson Electric Co's Dividend Analysis
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 2.36% and a 12-month forward dividend yield of 2.38%. This suggests an expectation of increase dividend payments over the next 12 months.
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. And 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 2.54%.
Emerson Electric Co's Dividend Analysis
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 2023-09-30, Emerson Electric Co's dividend payout ratio is 0.56.
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 2023-09-30, 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, a rate that underperforms than approximately 77.25% 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, a rate that underperforms than approximately 57.84% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of 7.00%, which underperforms than approximately 53% of global competitors.
Next Steps
Considering Emerson Electric Co's longstanding history as a dividend king, its consistent dividend growth rate, and a manageable payout ratio that suggests dividends are well-covered by earnings, the company presents a compelling case for income-focused investors. The robust profitability rank further supports the dividend's sustainability, although growth metrics indicate some challenges ahead. Investors should weigh these factors along with the company's strategic initiatives and competitive position in the industry to make informed decisions.
Is Emerson Electric Co poised to continue its dividend royalty in the years to come? This is a question value investors might ponder as they consider the balance between dividend reliability and growth potential. For those seeking to expand their portfolio with dividend-paying stocks, 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.
