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Over the past 10 years Emerson Electric Co (NYSE:EMR) has returned an average of 3.00% per year from dividend payouts. The company currently pays out a dividend yield of 2.82% to shareholders, making it a relatively attractive dividend stock. Should it have a place in your portfolio? Let’s take a look at Emerson Electric in more detail. View our latest analysis for Emerson Electric

Here’s how I find good dividend stocks

When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:

• Does it pay an annual yield higher than 75% of dividend payers?

• Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?

• Has the amount of dividend per share grown over the past?

• Is its earnings sufficient to payout dividend at the current rate?

• Will the company be able to keep paying dividend based on the future earnings growth?

Does Emerson Electric pass our checks?

Emerson Electric has a trailing twelve-month payout ratio of 73.84%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect EMR’s payout to fall to 50.16% of its earnings, which leads to a dividend yield of 2.89%. However, EPS should increase to $3.24, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. In the case of EMR it has increased its DPS from $1.2 to $1.94 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock. Relative to peers, Emerson Electric generates a yield of 2.82%, which is high for Electrical stocks but still below the market’s top dividend payers.

Next Steps:

Keeping in mind the dividend characteristics above, Emerson Electric is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Below, I’ve compiled three key factors you should further examine:

1. Future Outlook: What are well-informed industry analysts predicting for EMR’s future growth? Take a look at our free research report of analyst consensus for EMR’s outlook.

2. Valuation: What is EMR worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether EMR is currently mispriced by the market.

3. Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.