Emerson Stock Analysis (EMR) & Dividend Review

Emerson Electric: A Dividend King

Let’s work through an Emerson dividend stock analysis.  Why? Because Emerson’s dividend growth hasn’t met my expectations lately.

So, I would like to understand what is going on. Let’s see if the dividend is safe and positioned to grow in the near future.

To kick it off, a few highlights from this article…

emerson dividend king

Disclosure: At no cost to you, I may get commissions for purchases made through links in this post.

Emerson Dividend Stock Review: Key Takeaways

1. Emerson is an industrial stock that pays dividends. And can be considered a possible holding in a long-term stock portfolio with the objective of producing income.

2. The company has a history of increasing dividends every year and has earned the lofty status of Dividend King.

3. Emerson’s dividend growth rate has been disappointing in recent years. But its dividend appears to be quite safe.

4. The stock’s current combination of dividend yield and dividend growth isn’t particularly attractive to me. So, I intend to hold my shares. But have not interested in buying more.

With those big picture points in mind, let’s get on with our checkup of Emerson and its dividend.  We will take a closer look at Emerson’s dividend safety, dividend growth potential, stock valuation, and much more.

As with all the stocks I review, Emerson is a stock pick in my Dividends Diversify model stock portfolio. Before you go, be sure to check out some of the other dividend-paying companies it holds.

But now, on to our Emerson dividend stock review…

Emerson – Company Background

Emerson focuses on 2 core business platforms:

  • Industrial automation solutions to help businesses and countries operate more efficiently
  • Products and solutions for the commercial and residential real estate markets 

The industrial business is the larger of the two.

Business Strategy

A past business restructuring resulted in Emerson divesting businesses. And those businesses made up nearly one-third of revenues.

They moved from 5 business platforms down to the 2 they currently operate.

Furthermore, Emerson’s current strategy around these 2 platforms is focused on:

  • Implementing cost savings programs
  • Optimizing their manufacturing footprint
  • Improving their financial position and capital structure
  • Returning cash to shareholders
  • Targeted mergers and acquisitions

First of all, these stated objectives are representative of good dividend stock companies in general.

Furthermore, it is possible Emerson will seek to split or restructure into 2 or more pieces in the coming years. To become even more focused on unlocking shareholder value. From the different business areas in which they operate.

Finally, Raytheon (RTX), is another industrial stock that pays dividends. And also, a member of the Dividends Deluxe model portfolio.

Like Emerson, Raytheon went through a dramatic restructuring. It resulted in a merger with United Technologies.

industrial stocks that pay dividends
Industrial Automation: A big part of Emerson’s business

We can’t tell what the future will bring for Emerson. But we can check out the health of its dividend metrics and its stock.

Because by receiving regular dividends. It is a great way to improve your money management situation.

So, let’s get on with it…

Emerson Stock Symbol

First of all, Emerson stock trades on the New York Stock Exchange under the symbol EMR (NYSE: EMR).

Emerson Stock Dividend Payout Per Share

Emerson stock pays an annual forward dividend rate per share.

The forward dividend per share is the most recent quarterly dividend paid. Multiplied by the 4 calendar quarters the company pays dividends each year.

Dividing the forward dividend per share by the stock price gives us dividend yield…

Emerson Dividend Yield

As of this update, the yield is a little lower than I prefer for my dividend stock investments. Since I prefer to get at least a 3% yield when making new purchases.

On the other hand, a lower dividend yield is typically a good sign of dividend safety.

Furthermore, stock dividend yields can change quickly. Because the yield is inversely related to the stock price. So, be sure to check the current yield before investing. To make sure it meets your expectations.

Next, more about Emerson’s dividend…

How Often Does Emerson Pay Dividends?

Emerson pays dividends every 3 months or 4 times per year.

They follow a typical quarterly dividend payment pattern. That many other dividend-paying companies use.

When Does Emerson Pay Dividends?

Emerson’s quarterly stock dividends fall in the months of March, June, September, and December. The dividend is usually paid on the 10th day of these months.

I say usually because sometimes the 10th falls on a weekend. Emerson’s dividend is paid either on the 9th day or the 11th day when this is the case.

Speaking of dividend dates…

Emerson Ex-Dividend Date

Are you a potential new shareholder? Or someone looking to make an add-on investment to your current Emerson shares to increase your dividends?

Then you may want to receive the next Emerson dividend payout. To do so, you must complete your investment BEFORE the ex-dividend date.

Emerson’s ex-dividend date falls in the month PRIOR to when it pays dividends. Furthermore, it comes in the middle of those months. On or around the 15th day. The exact date changes slightly each quarter.

So, refer to Emerson’s website for the precise date. Or its most recent quarterly press release announcing the company’s dividend payment.

Emerson Dividend History

The company has a long and rich dividend history. Specifically, Emerson’s consecutive annual dividend growth streak is amazing.

Because the company started increasing its dividend annually in 1957. And continued doing so every year since then.

Emerson Has Achieved Dividend King Status

This is one of the longest annual dividend increase streaks on record. It qualifies Emerson as a Dividend King.  Dividend Kings have increased their dividend payments annually for at least 50 years in a row.

But, let’s talk about the more recent dividend growth rate…

Emerson Dividend Growth Rate

Looking back, the trend is clear to me. The company’s dividend growth has been low, slow, and disappointing in recent years.

Couple the slow dividend growth rate with a low dividend yield. And Emerson is not a very exciting dividend growth stock. At least not in my opinion.

I would like to see dividend growth in the 5-7% range each year. Because of the low dividend yield.

Since strong dividend growth is essential. No matter the amount of money you want to make from dividends.

Emerson Dividend Policy Statement

First of all, higher dividend growth appears to be limited by Emerson’s stated dividend policy. Furthermore, the company’s dividend policy is part of a broad capital allocation plan.

Their capital allocation plan suggests paying out about half of operating cash flow to shareholders. In the form of both dividends and share repurchases.

They do so to reward shareholders with cash payments. That is why companies pay dividends.

But, I am not pleased with Emerson’s recent dividend growth. On the other hand, I appreciate it when a company communicates its objectives for using cash. It helps me make a plan for my monthly dividend income.

Furthermore, by associating dividend growth to financial performance. Operating cash flow in Emerson’s case.

We just need better financial results to kick start more rapid dividend growth! And a commitment to dividend growth. More so than share repurchases.

Easier said than done, I suppose. And take note, a company is not required to pay dividends. Additionally, they can change their dividend policy at any time.

Let’s look at the financial reporting and business fundamentals next. To see what they tell us about the company’s current and future financial performance.

Emerson Stock Analysis: Revenue Trend

Historically, there is a lot going on with the companies revenue.

First of all, remember that Emerson’s business restructuring divested one-third of the company’s revenue base.

Furthermore, Emerson was negatively impacted by an unprecedentedly long industrial downturn dating back to the great recession. Fortunately, the global industrial economy has recovered since then.

In addition, Emerson’s revenues have been exposed to the oil industry.  So business activity from that sector can be volatile. And heavily influenced by the price of oil.

Finally, as an industrial company. Emerson’s business will always be tied to the ups and downs of the global economy.

Emerson Dividend Payout Ratio Based On Earnings

Compared to the past, Emerson emerged as a leaner higher-margin business. 

And the dividend payout ratio continues to check in at a reasonable level.

But, I would not expect Emerson’s management to let it get much higher. Most industrial dividend stocks, because of their economic sensitivity, operate with lower dividend payout ratios.

Let’s cross-check dividend payments against free cash flow. Since dividends are paid from cash, not accounting earnings. And Emerson management communicates its capital allocation plans based on cash flow performance.

Emerson Dividend Payout Ratio Based On Free Cash Flow

Emerson generates a healthy free cash flow. And the dividend payments only consume a fraction of it. This is a good sign.

Returning cash flow in the form of dividends to shareholders. That is what dividend investing is all about.

On the other hand, the very small Emerson dividend increases are disappointing. Increases where it appears the primary intent is to keep their annual dividend increase streak alive.

Because management certainly does not want to lose the company’s status as a Dividend King.

Okay. I now know enough about Emerson’s dividend metrics. To make a dividend growth forecast. Let’s cover that next.

Emerson Dividend Growth Forecast

I make a projection of future dividend growth for all my dividend-paying stocks. I do this for 2 reasons.

First of all, a dividend growth forecast helps me understand what my dividend income will be in the future. Furthermore, it aids in valuing a stock using a dividend discount model approach.

To make my forecast, I review and evaluate the following:

  • Historical dividend growth rates
  • Dividend payout ratios
  • Management’s objectives for the dividend (when provided)
  • The company’s business prospects and growth strategy

So, I project Emerson’s future dividend growth to be 2-4% annually.

Emerson Credit Rating

A company’s credit rating reflects its ability to meet financial commitments as they come due.  It is a reflection of the strength of their balance sheet and financial condition.

Emerson has investment-grade credit ratings from S&P and Moody’s respectively.  Thus, the company maintains a low credit risk evaluation as shown in the chart below.

Credit Rating Evaluation Grid

Credit rating evaluation grid for each major rating agency

So, Emerson’s credit ratings are a good sign. They are in line with other high-quality dividend-payers.

Emerson’s Financial Position

In another good indication of financial stability, Emerson keeps a conservative capital structure. Keeping debt at reasonable levels versus equity financing.

This is another positive sign of Emerson’s financial strength. And, a company with disciplined financial management.

Now that we know credit ratings and debt levels, let’s talk Emerson dividend safety.

Emerson Dividend Safety

The facts that show exactly how a company’s dividend is working and its safety include:

  • Dividend payout ratios
  • Historical dividend track record
  • Dividend yield
  • Free cash flow generation
  • Financial position & credit ratings
  • Overall business health

Based on these factors, I judge Emerson’s dividend to be very safe.

Furthermore, safety to me means that a dividend reduction is highly unlikely in the foreseeable future.

Emerson Stock Valuation

Let’s wrap this Emerson dividend stock research up with a look at its stock valuation. I will use two methods to get a perspective on the value.

Those methods will be:

  • Dividend discount model
  • Simply Investing report

Emerson Dividend Discount Model

The dividend growth stock discount model uses the following facts and assumptions we have covered thus far:

  • Current annual dividend payments
  • Projected dividend growth

Also, my desired annual return on investment.

Based on these assumptions, the dividend discount model suggests Emerson stock is overvalued.

It is not surprising to me that the dividend discount model sees Emerson stock as overvalued.

Because this model will always place a low value on a dividend income stock. That has a low dividend yield and slow dividend growth.

Simply Investing Report

First of all, the Simply Investing Report is an interactive online platform that provides high-quality dividend stock analysis and recommendations. Be sure to read my full review about Simply Investing.

Furthermore, I like to use the metrics from Simply Investing as a cross-check on my analysis. And especially appreciate the publication’s use of dividend yield as a primary indicator of value.

Finally, my last check of the Simply Investing report showed Emerson stock to be overvalued.

Source: Simply Investing

Emerson Stock Valuation Summary

As of this article update, EMR stock looks a little pricey.

But, valuation metrics can change suddenly. Either due to stock price volatility. Ors shifts in business fundamentals.

That’s one of the reasons I like Simply Investing. For the latest dividend metrics, valuation measures, and current dividend stock recommendations.

Because it’s critical to invest in the right stocks. And buy them at a good price. To improve your long-term total returns.

Okay. Let’s wrap this review up with a few concluding thoughts. And my current position and path forward with EMR.

Understanding that building and maintaining a growing stream of dividends is my primary investment objective.

Emerson Dividend Stock Analysis – Conclusions

Here are the good and bad points about dividends. Related to this dividend stock, in my opinion.

I first established a stock position in Emerson back in 2009 and subsequently added to it in small increments over the years.  However, it still remains one of my smaller positions.

I have been disappointed in the lack of dividend growth. And now, the stock’s valuation is not attractive to me.

If I didn’t already own Emerson stock, I wouldn’t buy it today. But, I’m going to hold my shares for now.

First of all, it is hard for me to sell out of a Dividend King. Furthermore, I do not want to realize a taxable gain on my shares. Finally, safe industrial stocks that pay dividends can be challenging to find for a long-term buy-and-hold dividend investor.

So, Emerson stock represents a solid “hold” in my portfolio.

Further Reviews of Industrial Stocks That Pay Dividend Stocks

My Favorite Dividend Investing And Finance Resources

Disclosure & Disclaimer: I am not a licensed investment adviser, financial adviser, or tax professional. And I am not providing you with individual investment advice, financial guidance, or tax counsel. Furthermore, this website’s only purpose is information & entertainment. And we are not liable for any losses suffered by any party because of information published on this blog.

I own Emerson stock and collect the Emerson dividend.