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The Recently Recommended Monthly Stock Special
Recently Recommended

The recently recommended company is *Emerson Electric Co. (EMR)

Comparison EMR (recently recommended stock of the month) vs SP500 (by Vanguard SP500 Index Fund) in the last 10 years.

Company Information:

Emerson Electric Co. (EMR) was established in 1890 in St. Louis, Missouri as Emerson Electric Manufacturing Co. The company manages five business segments: process management, industrial automation, network power, climate technologies, and tools and storage. Its primary products include motors, drives, actuators, valves, switches, test equipment, air conditioning compressors, electric tools, and home storage solutions. Emerson’s best-known brands include RIGID tools, ClosetMaid organizers, and InSinkErator garbage disposals.

 

Its current total market capitalization of $42.6 billion makes EMR a large capitalization stock (a large-cap stock has a market capitalization value of more than $10 billion) and its long history of consistent earnings growth and dividend payments makes it a solid company. It is considered a solid and well-diversified business with a wide economic moat and sustainable competitive advantage over its rivals that also enjoys a solid corporate culture. According to Yahoo! Finance, consensus estimates call for the company to earn about $3.35 per share this year, up from $2.64 per share last year, and to go to about $3.74 per share next year. Emerson Electric Co. has paid dividends to investors since 1947 and has increased its payments for 61 consecutive years, which makes it a dividend aristocrat. During the past five years, it has increased its dividends at an average rate of 3.5%, and its quarterly payment of $0.49 per share currently provides a yield of 2.86%.

 

The value of dividends reinvestment: A hypothetical investment in Emerson Electric Co. has grown cumulatively (including dividends reinvested) 5,587.28% during the past forty years. The same investment has grown only 2,256.04% in the same period of time, excluding dividends. The stock exhibits a healthy Dividend Payout Ratio (DPR is the proportion of earnings paid out as dividends to shareholders) of 59.0%, which means the company is paying out 59.0% of all its net income in dividends and is retaining a large percentage of earnings to reinvest or grow the business. Its average DPR during the past five years is 64%. According to Morningstar, the stock is trading 15% below its Fair Value Estimate, making it attractive for investors with a long-term investment horizon.

 

Technically (from the chart’s perspective) EMR also looks attractive, trading 14.1% below its all-time high, 4.5% below its 200-day moving average line (200sma) and 8.4% below its 50-day moving average line (50sma), while it is forming a long base (price consolidation pattern) between $80 and $66 approximately, in which $66 is acting as a technical support level. The index funds Vanguard Total Stock Market Index and Vanguard 500 Index are major shareholders of EMR, holding 2.6% and 1.9% of its shares respectively. The stock is also one of the 63 holdings of the mutual fund managed my Moneypaper Advisors, the MP 63 Fund (DRIPX), a Morningstar 4-star fund (based on 5-year, 10-year, and 15-years), with a Morningstar analysts’ Gold Star designation. EMR’s main competitors are Honeywell International Inc. (HON) and Rockwell Automation Inc. (ROK).

 

Best and worst years during the past 40 years: Its best year was 1991, in which EMR returned, including dividends, 45.7%. On the flip side, its worst year was 2008, when the stock declined 35.4% including dividends. EMR’s Dividend Re-investment Plan charges no fees for cash investing, dividend reinvestment, safekeeping, automatic investment or termination of the plan. With the stock being fundamental and technically attractive, this company is an appropriate holding for investors who wish to build a position over the long term.

 

Disclosure: Mario Medina is a long-term investor in EMR, and his investment strategy is to add small amounts periodically (also known as dollar cost average or DCA), always with a long-term view. The author is also co-manager of the MP 63 Fund (DRIPX), which holds a position in the company. The author wrote the article himself and it expresses his own opinions. The author has no business relationship with EMR and this article is not intended as a recommendation to invest as the information published does not take into account any subscriber's personal finances, goals or risk tolerance. Accordingly, you should be aware of all the risks associated with any financial investment and should consult an independent financial advisor for any personal investment advice.

 

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