Updated on May 21st, 2024 by Bob Ciura
The Dividend Aristocrats consist of companies that have raised their dividends for at least 25 years in a row. Many of the companies have turned into huge multinational corporations over the decades, but not all of them.
You can see the full list of all 68 Dividend Aristocrats here.
We created a full list of all Dividend Aristocrats, along with important financial metrics like price-to-earnings ratios and dividend yields. You can download your copy of the Dividend Aristocrats list by clicking on the link below:
Disclaimer: Sure Dividend is not affiliated with S&P Global in any way. S&P Global owns and maintains The Dividend Aristocrats Index. The information in this article and downloadable spreadsheet is based on Sure Dividend’s own review, summary, and analysis of the S&P 500 Dividend Aristocrats ETF (NOBL) and other sources, and is meant to help individual investors better understand this ETF and the index upon which it is based. None of the information in this article or spreadsheet is official data from S&P Global. Consult S&P Global for official information.
Emerson Electric (EMR) has raised its dividend for 67 consecutive years, giving it one of the longest dividend growth streaks in the stock market.
This also qualifies the company as a Dividend King. There are only four companies that have longer dividend growth streaks than Emerson.
The company has achieved such an exceptional dividend growth record thanks to its strong business model, its decent resilience to downturns and its somewhat conservative payout ratio.
These factors provide a margin of safety during recessions. In this article, we’ll review Emerson’s prospects as an investment today.
Business Overview
Emerson Electric was founded in Missouri in 1890. Since then, it has evolved from a regional manufacturer of electric motors and fans into a technology and engineering company, providing solutions to industrial, commercial and individual customers.
It is a global leader with a presence in more than 150 countries It offers industrial equipment and software to the oil and gas industry, refining, power generation as well as other industries.
Source: Investor Presentation
In the 2024 first quarter, Emerson reported quarterly revenue of $4.38 billion, which beat estimates by $86 million. Adjusted EPS of $1.36 beat estimates by $0.11 per share.
Underlying sales rose 8% year-over-year. Adjusted earnings-per-share increased 25% from the same quarter last year.
For the full year, Emerson expects 5.5%-6.5% underlying sales growth. Earnings-per-share are expected in the range of $5.40-$5.50 for 2024.
Growth Prospects
Emerson has pursued growth by expanding its customer base but also by acquiring many companies. In fact, the company acquires and divests parts of its business regularly to create an optimal portfolio mix.
The Aspentech transaction was huge for Emerson, giving it access to Aspentech’s double-digit annual earnings growth. In addition, Emerson divested its Therm-O-Disc business, and sold its Russia business following that country’s invasion of Ukraine.
Overall, Emerson has conducted many acquisitions and divestments to reshape its business.
Source: Investor Presentation
Emerson is undergoing a significant shift in its strategy, whereby it is selling off legacy units and focusing more on automation and recurring revenue.
We are estimating growth of 6% as management remains bullish, and as there are signs of organic revenue growth improvement, as well as with respect to margins.
Mid-single digit growth in revenue and a tailwind from the buyback will be the key drivers of earnings-per-share growth in the coming years.
Competitive Advantages & Recession Performance
As Emerson has served its customers for several decades, it has built great expertise in the markets it serves. In addition, thanks to its large scale and its dominant global presence, it has a great reputation. This provides the company with a significant competitive advantage.
On the other hand, due to its reliance on industrial and commercial customers, Emerson is vulnerable to recessions and downturns in the energy sector. In the Great Recession, its earnings per share were as follows:
- 2007 earnings-per-share of $2.66
- 2008 earnings-per-share of $3.11 (17% increase)
- 2009 earnings-per-share of $2.27 (27% decline)
- 2010 earnings-per-share of $2.60 (15% increase)
- 2011 earnings-per-share of $3.24 (25% increase)
Emerson got through the Great Recession with just one year of decline in its earnings per share. That performance was certainly impressive.
Given its sensitivity to the economic cycles, it is impressive that Emerson has grown its dividend for over 65 consecutive years. The exceptional dividend record can be attributed to the aforementioned decent resilience of the company during downturns.
Another reason is the conservative payout ratio, which should come in at about 40% for this year, which provides a material margin of safety to the dividend during economic downturns.
Valuation & Expected Returns
Based on expected adjusted EPS of $5.40 for fiscal 2024, Emerson is currently trading at 21.1 times its expected EPS. The earnings multiple is above our estimate of fair value at 19 times earnings.
This implies a 2.1% annual headwind should it reach 19 times earnings over the next five years.
Therefore, we project total annual returns of 5.7% over the next five years, as 6% earnings growth and the starting yield of 1.8% are partially offset by a low single-digit headwind from multiple reversion.
Final Thoughts
Emerson has an impressive dividend growth record, particularly given its heavy reliance on industrial and commercial customers, who struggle during recessions or downturn in the energy sector.
The strong dividend yield of the stock and its reliable dividend growth make it appealing for some income-oriented investors.
We see the stock as somewhat overvalued today. While the dividend growth streak is notable, the total return potential for the stock is mediocre at this point.
As a result, Emerson earns a hold rating due to projected returns.
Additionally, the following Sure Dividend databases contain the most reliable dividend growers in our investment universe:
- The Dividend Contenders List: 10-24 consecutive years of dividend increases.
- The Dividend Challengers List: 5-9 consecutive years of dividend increases.
- The Dividend Champions: Dividend stocks with 25+ years of dividend increases, including those that may not qualify as Dividend Aristocrats.
- The Dividend Achievers: dividend stocks with 10+ years of consecutive dividend increases.
- The Best DRIP Stocks: The top 15 Dividend Aristocrats with no-fee dividend reinvestment plans.
If you’re looking for stocks with unique dividend characteristics, consider the following Sure Dividend databases:
- The Complete List of Monthly Dividend Stocks: stocks that pay dividends each month, for 12 payments over the year.
- The Blue Chip Stocks List: this database contains stocks that qualify as either Dividend Achievers, Dividend Aristocrats, or Dividend Kings.
The major domestic stock market indices are another solid resource for finding investment ideas. Sure Dividend compiles the following stock market databases and updates them monthly: