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Emerson Electric (EMR) Stock Analysis

by | Dividend Aristocrats & Champions, Dividend Kings

Emerson Electric Dividend

(updated 10/13/2017)

Emerson Electric (EMR) has paid a dividend since 1947 and increased its dividend for 60 consecutive years; qualifying the company as a Dividend King, Dividend Aristocrat, and Dividend Champion.

Price: $63.98
Current Dividend: $1.92

Dividend Yield: 3.0%
Cash Dividend Payout Ratio: 79%

Market Capitalization: 41 B
Enterprise Value: 43 B

Description

Sector: Industrials
Industry: Diversified Industrials

Emerson is a global diversified manufacturing and solutions company. EMR combines technology and engineering to help customers innovate to improve productivity and efficiency. The company serves the industrial, commercial and consumer markets through two new business platforms: Automation Solutions and Commercial & Residential Solutions.

SWOT Analysis

Strengths

Emerson has a long history of adapting to changing environments. Big changes are underway right now; shedding business (i.e. Network Power in 2016) and focusing businesses that fit their two new platforms.

EMR has a strong global presence (more that 150 countries) with a little more than one-half of EMR revenues coming from overseas. The company has a deep and varied product portfolio complemented by a stellar reputation and strong brand. It boasts a large “moat” in field instrument segments and asset management systems.

Weaknesses

High research and development costs. EMR’s large customers have high bargaining power.

Opportunities

New technologies and obsolescence of older customers plants provide opportunities for substantial growth in developed nations. Expansion into new frontier markets.

Threats

There is intense competition in some of EMR’s business segments, particularly industrial automation. In addition, as a truly global company, they are subject to economic and political risks affiliated with foreign production facilities.

Dividend Analyzer Checklist

(updated September 2017)

Dividend Safety Score (19/33 points)

Dividend Per Share (ttm): $1.92
Dividend Payout Ratio (ttm): 81%
Cash From Operations (CFO) Per Share (ttm): $3.23
CFO Dividend Coverage (CFO / DPS): 1.7 (0/6 points)
Free Cash Flow (FCF) Per Share (ttm): $2.57
FCF Dividend Coverage (FCF / DPS): 1.3 (3/6 points)
Net Financial Debt: $-971 M
Total Assets: $17277 M
Net Financial Debt / Total Assets: -6%  (11/12 points)
Net Financial Debt to EBITDA (ttm): 194%
Total Liabilities to Assets Ratio (Qtr.): 54%
Piotroski Score (1-9) (TTM): (5/9 points)

Profitability & Growth Score (10/33 points)

Revenue (10 Year Growth) *CAGR > 4.14%: -3.0 (0/4 points)
EPS Basic Cont. Operations (10 Year Growth) CAGR > 4.14%: 0.9% (0/4 points)
Cash From Operations (10 Year Growth) CAGR > 4.14%: 1.4% (0/6 points)
Operating Earnings Yield (ttm): 7.5% (3/7 points)
Net Income (ttm): $1518 M
Gross Profit (ttm): $5301M
Total Assets: $17277 M
Gross Profitability Ratio = GP / Total Assets: 31% (7/12 points)
Cash Return On Invested Capital (CROIC)(tttm): 12%
Return on Invested Capital (ROIC): 11%
Return on Invested Capital (ROIC) (5 Year Median): 13%
Return on Invested Capital (ROIC) (10 Year Median): 15%

Valuation Score (18/34 points)

Free Cash Flow Yield (ttm): 4.2% (5/9 points)
EV to EBIT (ttm): 15.6 (4/9 points)
EV to EBITDA (ttm): 12.6 (4/9 points)
PE10: 20.6 (5/7 points)
Price to Sales Ratio (ttm): 3.3
Price to Book Value (ttm): 4.8
Price to Earnings Ratio (P/E) (ttm): 25.4

TOTAL POINTS – (47/100) (50 is an average score)

*Compound Annual Growth Rate (CAGR)
**A Compound Annual Growth Rate of 4.14% = a 50% gain over 10 years.

Emerson Electric (EMR) Earning Report Dates

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Conclusion

(updated September 2017)

Emerson Electric (EMR) is ranked #171 (out of 342) overall and #43 (out of 71) in the Industrials Sector by the Dividend Analyzer.

The fact that EMR has increased dividends paid for 59 consecutive years, means the stock deserves some kind of premium. I’m concerned that premium is too high and not taking into account all the current risk.

Type of Investor / Recommendation

Large Diversified Dividend Portfolios /  Average Choice
Looking For Exposure to Dividend Kings & Aristocrats / Average Choice
Looking For Exposure to Industrials Sector / Below Average Choice
Deep Value Investors / Avoid

Portfolio Position Disclosures:
DVB Dividend Kings & Aristocrats: None
DVB Dividend Growth: None
DVB High Income: None
Arbor Asset Allocation Model Portfolio (AAAMP): None

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Disclaimer: While Arbor Investment Planner has used reasonable efforts to obtain information from reliable sources, we make no representations or warranties as to the accuracy, reliability, or completeness of third-party information presented herein. The sole purpose of this analysis is information. Nothing presented herein is, or is intended to constitute investment advice. Consult your financial advisor before making investment decisions.
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