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On Tuesday, Dividend Growth portfolio holding Emerson Electric (NYSE:EMR) cut its fiscal year 2012 fourth-quarter outlook for revenue by $120 million due to unfavorable foreign exchange fluctuations. However, the firm reiterated its full-year earnings guidance of $3.35-$3.50 per share, and noted that orders for the last three months advanced 3% on a constant currency basis, though orders were down 2% compared to the same period a year ago on an absolute basis.

This underscores several revisions we've seen in other industries exposed to foreign exchange rates. As the dollar strengthens against the Yen and the Euro, revenue and earnings estimates come down. However, we do not think this significantly impacts a firm's long-term valuation as firms tend to do an adequate job adjusting operations to manage cash flow and earnings, which Emerson is doing.

Regardless, we think shares are fairly valued at current levels, but we think the company is attractive as a dividend-growth investment. Shares have an annual dividend yield of 3.6% at current prices, and we think there is an excellent chance the company raises its dividend going forward. The company posts an impressive Valuentum Dividend Cushion score of 2, meaning it can cover future dividend payments with future free cash flow 2 times after considering its capital structure. We hold the shares in our Dividend Growth portfolio.

Source: Dividend Growth Gem Emerson Electric Cuts Revenue Outlook

Additional disclosure: EMR is included in the portfolio of our Dividend Growth Newsletter.