Understanding the dividend of a company can be a valuable asset in making an informed decision to invest, stay invested, or not to invest.
It is important for an investor to consider the benefits that dividends can offer and how easy it is to include dividend paying stocks in any portfolio. Some of the advantages a quality dividend stock can offer are attractive returns, less volatility, and, over time, increasing yields. These are some aspects that a quality dividend stock can add to a portfolio.
In this article, I will be analyzing Emerson Electrics' (EMR) historical dividend payout, earnings per share growth rate, and historical dividend payout ratios. Based on these criteria, we should get a good understanding of the history of the dividend and some estimates of what to expect in the future.
According to the company website, "Emerson was founded in 1890 in St. Louis, Missouri, as a manufacturer of electric motors and fans. Over the past 100-plus years, Emerson has grown from a regional manufacturer into a global technology solutions powerhouse."
Below is a chart of the dividend payout per fiscal year for Emerson Electrics' common shares since 2003.
Click to enlarge images.
The current dividend payment as of Nov. 16, 2012, for Emerson Electric is $0.41 per common share. The current expected payout for fiscal year 2013 is $1.64. In 2013, analysis at MSN Money are estimating that Emerson Electric will have an EPS of $3.60, while analysts at Bloomberg Businessweek are estimating Emerson Electric will have an EPS $3.59.
Bloomberg analysts are estimating Emerson Electrics 2013 revenue to be at $25.1 billion, which would give the company a net profit margin of 9.59% and a projected net income of $2.61 billion. This would be an increase in revenue and net profit margin over 2012. In 2013, with a dividend payout of $1.64 and an EPS of $3.59, Emerson Electric would have a payout ratio of 45.68%.
With a payout ratio of 45.68%, or 0.4568, Emerson Electric should be able to maintain its 2013 estimated payout of $1.64. This would be a 2.5% increase over 2012.
Since 2003, the average payout ratio for Emerson Electric is 0.49. The estimated dividend payout ratio for 2013 is 0.46. This ratio would be in line with the company's payout ratio average since 2003.
Based on many of the company's financial ratios, Emerson Electric appears to be very strong regarding its financial health. The company seems to have an handle on its debt, as I described in my article "Analyzing Emerson Electric's Debt And Risk." The company looks to have some strong growth, and plenty of free cash to maintain its growth and continue to provide a dividend, as described in my articles "Emerson Electric: Profitability Analysis" and "Emerson Electric: Inside The Numbers."
Looking forward to 2013, the indications noted above reveal that Emerson Electric should be able to maintain its tradition of raising its dividend.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.