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The board of Emerson Electric Co. (NYSE:EMR) has announced that it will pay a dividend of $0.5275 per share on the 10th of June. This means that the annual payment will be 1.9% of the current stock price, which is in line with the average for the industry.
We've discovered 1 warning sign about Emerson Electric. View them for free.
Emerson Electric's Payment Could Potentially Have Solid Earnings Coverage
Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, Emerson Electric's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
Looking forward, earnings per share is forecast to rise by 73.9% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 35% by next year, which is in a pretty sustainable range.
Check out our latest analysis for Emerson Electric
Emerson Electric Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $1.72 in 2015, and the most recent fiscal year payment was $2.11. This works out to be a compound annual growth rate (CAGR) of approximately 2.1% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.
Dividend Growth May Be Hard To Achieve
The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. Although it's important to note that Emerson Electric's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.
In Summary
Overall, we think Emerson Electric is a solid choice as a dividend stock, even though the dividend wasn't raised this year. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Emerson Electric that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.