Key Takeaways:
- Emerson currently offers a 2.1% dividend yield today.
- Even though this is a rather low dividend yield, EPS is expected to grow nearly 10% annually over the next 3 years.
- Analysts think the stock has nearly just over 30% upside today.
- Get accurate financial data on over 100,000 global stocks for free on TIKR >>>
Emerson Electric isn’t the flashiest stock in the market, but that’s exactly why long-term investors like it.
This is a Dividend King with 68 years of uninterrupted dividend growth that’s lasted through multiple economic cycles.
Now, with the stock trading at what looks like a discount, Emerson could quietly be one of the better dividend stocks available today hiding in plain sight.
Why Has $EMR Stock Dropped?
Emerson Electric is down about 10% in the past 6 months.
This is largely due to investor concerns around slowing industrial demand and uneven global growth. Segments like discrete automation have seen weaker-than-expected order trends.
At the same time, the recent pullback may be more about the business’s valuation resetting after the AspenTech deal and divesting non-core units than any major business flaw.
Analysts Think The Stock Has 30% Upside Today
Analysts think the stock has nearly 30% upside today due to the business’s long-term growth potential.
Analyst estimates aren’t always accurate, but it’s all the more compelling to look closer when analysts think the stock has meaningful upside.
1: Dividend Yield
Emerson currently offers investors around a 2.1% dividend yield.
While there are stocks out there with higher dividend yields, what you’re getting with Emerson is a growing business that’s taken a disciplined approach with its dividend policy and raised its dividends for 68 consecutive years.
The business is expected to grow earnings in the high-single-digits over the next 3 years. Therefore, the 2% dividend yield is really just a bonus.
Find high-quality dividend stocks that are even better than Emerson Electric today. (It’s free) >>>
2: Dividend Safety
At the end of fiscal year 2024, Emerson had a very conservative 38% dividend payout ratio, which means about one-third of the company’s earnings were paid out to shareholders as dividends.
This means Emerson has an extremely safe dividend that investors should be able to count on for likely another decade to come.
See Emerson’s full growth forecast. (It’s free) >>>
3: Dividend Growth Potential
Analysts expect Emerson Electric to grow earnings-per-share in the high-single-digits over the next few years.
This should sound like music to the ears for long-term investors, because strong EPS growth tends to correlate with strong shareholder returns, and a company that earns more can grow its dividends more.
High-single-digit EPS growth might sound low, but it’s nothing to scoff at. This is enough to grow the business meaningfully over the long term.
Additionally, analysts expect dividends to grow in the low-single-digits over the next 3 years. While some investors might wish the company increased its dividend more, lower dividend growth can actually benefit the company in 2 ways:
First, lower dividend growth means the company can retain more of its earnings. The business can then invest its retained earnings to drive more earnings growth, which will end up leading to the stock becoming more valuable over time.
Second, lower dividend growth also means that the company has the wiggle room to continue increasing its dividend for decades to come. We’ve seen 3M snap its decades-long dividend growth streak last year because management had been increasing its dividend too rapidly for years, and the dividend had become too much for the company to keep paying out. We wouldn’t want a similar fate to befall Emerson Electric.
TIKR Takeaway
Emerson Electric combines a reliable dividend track record with long-term industrial exposure, and its current valuation makes it worth a closer look for income-focused investors.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
