This article originally appeared on The DIV-Net June 15, 2009.
Linked here is a detailed quantitative analysis of Emerson Electric Co. (NYSE: EMR). Below are some highlights from the above linked analysis:
Company Description: Emerson Electric Co. primarily makes backup power equipment for telecom and Internet providers and users, climate control components, and electric motors.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
- Avg. High Yield Price
- 20-Year DCF Price
- Avg. P/E Price
- Graham Number
EMR is trading at a discount to 1.) and 3.) above. If I exclude the high and low valuations and average the remaining two, EMR is trading at a 8.6% discount. EMR earned a Star in this section since it is trading at a fair value.
Dividend Analytical Data: In this section I consider five factors, see page 2 of the linked PDF for a detailed description:
- Rolling 4-yr Div. > 15%
- Dividend Growth Rate
- Years of Div. Growth
- 1-Yr. > 5-Yr Growth
- Payout 15% of avg.
EMR earned one Star in this section for 3.) above. EMR has paid a cash dividend to shareholders every year since 1947 and has increased its dividend payments for 52 consecutive years.
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:
- NPV MMA Diff.
- Years to > MMA
EMR earned both of the available Stars in this section. The NPV MMA Diff. of the $4,373 is in excess of the $2,500 minimum I look for in a stock that has increased dividends as long as EMR has. If EMR grows its dividend at 6.4% per year, it will take 3 years to equal the cumulative earnings from a MMA yielding an estimated 20-year average rate of 4.06%. EMR earned a Star since its Years to >MMA of 3 is less than 5 years.
Other: EMR is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index.
