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This Rising Dividend Stock Has Paid Off For 55 Years

 May 03, 2012 08:48 AM
 


(By Street Authority)In this low interest rate environment, investors have turned to high-yielding blue-chips as a source of retirement income. This five-part series will outline what I believe to be the top five dividend aristocrat stocks, most suitable for a retiree's portfolio.

In my first article on dividend aristocrat stocks, I described why the international health, hygiene and paper company giant, Kimberly-Clark (NYSE: KMB), makes a great defensive play.

For my second pick, I want to turn your attention to a dividend champion with a long history of solid growth that dates from 1892.

Originally, this company was the first to sell electric fans in the United States. But, with surging demand during World War I, its product line expanded to include sewing machines, drills and power tools.
 
Today, Emerson Electric (NYSE: EMR) is one of the largest conglomerates in the United States, as measured by its global workforce of more than 133,000 people across more than 150 countries.

This multinational powerhouse now designs and supplies a wide range of products and technologies for industrial, commercial and consumer markets across the globe, including electrical appliances, motors and power tools.

Solid revenue, dividend growth expected
In 2011, Emerson's total revenue topped $24.2 billion. Management expects global demand to drive revenue and earnings higher in the coming years  -- the five-year growth rate is projected at 11.4%, better than the projected 10.5% five-year growth of the S&P 500.

In addition to solid growth, the company offers an appealing forward dividend yield of about 3.1%. In comparison, the average stock on the S&P 500 yields just 1.9%.

Investors need not worry about this dividend going away anytime soon; Emerson has been paying a dividend for 55 years straight.

The company also has a reasonable payout ratio of about 45%. The payout ratio -- calculated by comparing dividends paid to earnings generated -- is an important metric for forecasting dividend sustainability. In comparison, a ratio of 80% or higher shows a company may be making dividend payouts it can't afford for long.

What's driving emerson's growth?
Helping support Emerson's growth -- and sustained dividend -- is the current strength in of its process management segment.


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