Dividend Aristocrats In Focus: Emerson Electric

Up to date on March 4th, 2025 by Felix Martinez

The Dividend Aristocrats encompass corporations which have raised their dividends for no less than 25 years in a row. Over the a long time, many of those corporations have change into large multinational companies, however not all.

You possibly can see the total listing of all 69 Dividend Aristocrats right here.

We created a full listing of all Dividend Aristocrats and essential monetary metrics like price-to-earnings ratios and dividend yields. You possibly can obtain your copy of the Dividend Aristocrats listing by clicking on the hyperlink beneath:

Disclaimer: Positive Dividend isn’t affiliated with S&P International in any approach. S&P International owns and maintains The Dividend Aristocrats Index. The data on this article and downloadable spreadsheet relies on Positive Dividend’s personal evaluate, abstract, and evaluation of the S&P 500 Dividend Aristocrats ETF (NOBL) and different sources, and is supposed to assist particular person traders higher perceive this ETF and the index upon which it’s primarily based. Not one of the data on this article or spreadsheet is official knowledge from S&P International. Seek the advice of S&P International for official data.

Emerson Electrical (EMR) has raised its dividend for 68 consecutive years, giving it one of many longest dividend progress streaks within the inventory market.

This additionally qualifies the corporate as a Dividend King. Solely 4 corporations have longer dividend progress streaks than Emerson.

The corporate has achieved an distinctive dividend progress file because of its robust enterprise mannequin, respectable resilience to downturns, and considerably conservative payout ratio.

These components present a margin of security throughout recessions. On this article, we’ll evaluate Emerson’s prospects as an funding at this time.

Enterprise Overview

Emerson Electrical was based in Missouri in 1890. Since then, it has advanced from a regional producer of electrical motors and followers right into a expertise and engineering firm, offering options to industrial, business and particular person clients.

It’s a international chief with a presence in additional than 150 international locations. It affords industrial tools and software program to the oil and gasoline trade, refining, energy technology, and different industries.

Within the 2025 first quarter, Emerson reported robust Q1 2025 outcomes, with web gross sales rising 1% to $4.175 billion and pretax earnings surging from $175 million to $775 million. Adjusted EBITA grew 15% to $1.169 billion, whereas GAAP EPS elevated 252% to $1.02. Free money movement jumped 89% to $694 million. The corporate additionally declared a $0.5275 per share dividend, payable March 10, 2025.

CEO Lal Karsanbhai credited the robust efficiency to Emerson’s industrial expertise portfolio and execution technique. He reaffirmed the corporate’s full-year outlook, anticipating continued demand energy and restoration in discrete markets within the second half.

For fiscal 2025, Emerson tasks 1.5%-3.5% web gross sales progress and adjusted EPS of $5.85-$6.05. Working money movement is forecasted at $3.6B-$3.7B, with $3.2B returned to shareholders by way of dividends and buybacks.

Supply: Investor Presentation

Progress Prospects

Emerson has pursued progress by increasing its buyer base and buying many corporations. The corporate often acquires and divests elements of its enterprise to create an optimum portfolio combine.

The Aspentech transaction was large for Emerson, giving it entry to Aspentech’s double-digit annual earnings progress. As well as, Emerson divested its Therm-O-Disc enterprise and offered its Russian enterprise following that nation’s invasion of Ukraine.

Total, Emerson has carried out many acquisitions and divestments to reshape its enterprise.

Supply: Investor Presentation

Emerson is present process a major shift in its technique. It’s promoting off legacy items and focusing extra on automation and recurring income.

We’re estimating progress of 9% as administration stays bullish, there are indicators of natural income progress enchancment, and margins are enhancing.

Income progress within the mid-single digits and a tailwind from the buyback would be the key drivers of earnings-per-share progress within the coming years.

Aggressive Benefits & Recession Efficiency

Emerson has served its clients for a number of a long time, constructing nice experience within the markets it serves. As well as, because of its massive scale and dominant international presence, it has a fantastic fame. This gives the corporate with a major aggressive benefit.

Then again, resulting from its reliance on industrial and business clients, Emerson is susceptible to recessions and downturns within the vitality sector. Within the Nice Recession, its earnings per share had been as follows:

2007 earnings-per-share of $2.66
2008 earnings-per-share of $3.11 (17% improve)
2009 earnings-per-share of $2.27 (27% decline)
2010 earnings-per-share of $2.60 (15% improve)
2011 earnings-per-share of $3.24 (25% improve)

Emerson survived the Nice Recession with only one 12 months of decline in earnings per share, which is actually spectacular.

Given its sensitivity to financial cycles, it’s spectacular that Emerson has grown its dividend for 68 consecutive years. The distinctive dividend file might be attributed to the corporate’s respectable resilience throughout downturns.

Another excuse is the conservative payout ratio, which needs to be about 36% this 12 months. This gives a fabric margin of security for the dividend throughout financial downturns.

Valuation & Anticipated Returns

Primarily based on anticipated adjusted EPS of $5.95 for fiscal 2025, Emerson is buying and selling at 19.2 occasions its anticipated EPS. This earnings a number of is decrease than our estimate of truthful worth, which is 20 occasions earnings.

This means a 0.2% annual tailwind ought to it attain 20 occasions earnings over the subsequent 5 years.

Subsequently, we venture complete annual returns of 11% over the subsequent 5 years, as 9% earnings progress, the beginning yield of 1.8%, and the 0.2 PE enlargement tail wind.

Last Ideas

Emerson has a powerful dividend progress file, significantly given its heavy reliance on industrial and business clients, who wrestle throughout recessions or downturn within the vitality sector.

We see the inventory as considerably undervalued at this time. Whereas the dividend progress streak is notable, the full return potential is respectable at this level.

Consequently, Emerson earns a purchase ranking resulting from projected returns.

Moreover, the next Positive Dividend databases comprise essentially the most dependable dividend growers in our funding universe:

Should you’re searching for shares with distinctive dividend traits, take into account the next Positive Dividend databases:

The main home inventory market indices are one other stable useful resource for locating funding concepts. Positive Dividend compiles the next inventory market databases and updates them month-to-month: