When it comes to investing in the stock market, people are looking for different things. Some look at long term potential for the stock to grow. When they go to sell, they want to make money per share owned. Others are looking a more rapid appreciation of stock, almost buying and selling daily in order to to make a profit over time. Still, others are not as concerned about stock price as they are about the potential for a solid dividend to be paid on a regular basis. This is a way to earn income over time, believing that the stock price is going to remain relatively stable in order for it to be sold at almost any point. Emerson Electric has become such a stock of choice amongst many investors. It is designed to pay a solid dividend over the long term.
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Emerson Electic has been around for years. They operate internationally and have become well known as an industry giant. At the current time, they are offering a three percent dividend that exceeds the total yield offered by the S & P 500 index fund. While the stock price itself is not necessarily cheap at the moment, it is still a desirable investment from the perspective that it can provide a solid income over the long term. Whenever any investor goes to look for a dividend stock, the history of dividend payments is of a primary concern. With that in mind, it is good to note the history Emerson Electric is very positive.
Let’s Look At the History
Many companies strive to increase the amount of their dividends every year in order to lure in new investors. Who doesn’t like to get income each year, while still retaining the value of the stock in their portfolio? Many companies do not quite reach their potential, having to cut dividends. This is a bad sign. However, Emerson Electric has been able to increase dividends every year for that pat six decades. There are very companies in the history of the stock market itself that has been able to do that. Given this history, there is simply no reason to worry about the company stopping their policy of dividend payments to its investors. This should be viewed as a long term stock purchase that will give you solid income for many years to come. In fact, Emerson Electric seems to make it their goal reward investors with the dividend payments. This type of loyalty is important to them.
Emerson Electric has actually evolved as a burins over the years. It changes with the times, and that is how they have been able to stay on top. When industry began to shift, they shifted right along with it. Other companies in the past few decades, Kodak and BlackBerry most notable among these, did not do this. They were unable to keep up with emerging technologies and shifting consumer tastes. Emerson Electric is a model at being able to adapt. They did not wait to implement change. In fact, they were at the forefront of doing so. For example. The company began to produce fans. It realized at one point that those same fans could be useful in other electrical devices, such as washing machines. Rather than wait for other companies to capitalize on this knowledge, Emerson Electric began to adapt its production line. It is this kind of thinking that has kept the company growing on an annual basis for more than a century. This is yet another reason that investors can feel confident purchasing this stock from a dividend perspective.
How is the Financial Outlook?
Another important factor to look at when considering any stock is the financial performance of the company. This is easpecially important when you are looking at a company for the long term. As with any company, Emerson Electric has its fair share of down years. It is impossible to avoid. Even given that reality, however, the company has still be able to pay dividends each and every year. The last few years are a perfect example of this. The company is an industry that has had a global slow down. This is across many of the sectors that Emerson Electric serves. As a result, the company has spent this time shifting its overall operation model, and this has had a negative impact on its total earnings. This has resulted in a payout amount per stock that is a bit lower than many investors would like. At the same time, it is important to consider the history of the company that we previously talked about. They have a long history of solid management, and they are able to prove to investors that they are committed to paying out annual dividends. At the end of the day, that speaks volumes.
It is also important to remember that dividends are paid to investors from cash on hand. Earnings has little to do with it. Emerson Electric has had plenty of cash on hand at all times for decades. Even when their earnings are down for a season or two, they are still able to cover their dividends out of existing cash flow. They have a positive balance sheet, and less than thirty percent of their operating budget is based upon long term debt. This is an excellent figure that contributes to a positive long term future.
While recent dividend increases at Emerson Electric are down in the one percent range, the long term outlook remains strong. If you look at the last ten years, investors can expect a 7.4 percent annual increase. This is quite a respectable number, especially if you are looking at the stock over the long term. While the price might not be a bargain today, it comes down to your reason for buying it. If you are looking years down the road, the income potential it almost guaranteed to always be there for you.
Written by Bill Vix
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