Lanny’s Recent Purchase – EMR

Well.. the market keeps saying- buy me, buy me, and there are opportune stocks everywhere at the moment, in my book.  I took advantage of a recent price slide on a stock that many have been purchasing over the last month, including the one and only – Bert.  I took a page out of his book and couldn’t be more thankful that he founded them in his screener and made my life a little easier.  Thanks again Bert for doing that, I appreciate it.  I had capital that finally was able to transfer over, now let’s see who, how much and why I bought this stock.

Recent Purchase – Emerson Electric Co. (EMR)

As I stated earlier, Bert had purchased this company a few weeks ago and also did a deep dive stock analysis before purchasing this stock.  He definitely saved me a few hours and made my research fairly easy.  I know I had a nice lump sum of money coming from a bonus, that I discussed in my savings rate article, which allowed me to be ready to make a purchase into a stock, since Mr. Market continues to take a turn down.

EMR Logo

Similar to my DOW Chemical purchase in July, I did a scan of 2 competitors and added them to a quick screening spreadsheet, which you’ll see pasted below, with the focus on our stock screener and other metrics to… take a look at the numbers, let’s take a look at what these guys bring to the table:

analysis

1. Price to Earnings Ratio: Under the S&P average currently, below the US domestic competitor of Honeywell and a tad higher then Siemens.  However, a 15.33 ratio to me looks under valued and for a dividend aristocrat who has increased dividends for over 58 years, that is great in my book.

2. Yield: Incredible yield, currently, at 3.79% at the time of my purchase.  This is higher than the other 2 I analyzed, as well as closely resembles my own overall portfolio weighted average yield, therefore, it keeps that at a moot point, you know?

3. Payout Ratio: Just under my tolerance level,typically, of 60%.  I am okay with this, given that the forward earnings are lower during the analyst review for this fiscal year of 2015, with higher earnings into 2016 projected.  I believe they still have room to grow their dividend, and currently – would like a 6-7% rate if possible.

4. Dividend Growth rate: Ah, yes I do love the growth rate.  The last 12 months, EMR has increased their dividend by 9.30%, which is higher than my overall portfolio currently.  I don’t expect as high of a dividend growth rate going forward, given a slightly higher payout ratio, however, they traditionally do hover around 54% for a multiple year payout ratio average (5 year average actually).  Honeywell had a great increase last year, but they don’t have the incredible track record that Emerson does.

5. The 5 year dividend yield average – Always a fun one to see and given the big decline this week – I was able to see this spread increase quite a bit to 79 basis points above their 5 year dividend yield average; which is another sign of undervaluation.  I feel that it’s a sign moreso because the stock price traditionally in the past has always calculated a 3.00% yield and if it currently is at 3.79%… the stock price has a ways to catch back up.

I know Mantra has purchased them recently, as well as my buddy Bert.  Look who got them a tad less baby!!!! All kidding and it’s a funny little jab at you guys, all jokes that I hope you take as one.  I am pumped to be a fellow shareholder with you guys… I also have to Thank you again Mr. Market for taking that downturn for me, always open to that move that you make!

Stock Purchase Summary

I deployed a total capital amount of $1,993.35, buying 40 shares (with commission) of EMR and added $75.20 to my forward looking dividend income.  With the power of dividend reinvestment – these dividends should almost provide 1.5 shares per year will be added, given that the dividend stays, at a minimum, stagnant.  Adding $75.20 to my annual goal breaks down to an extra, approximately, $6.27 per month that I will start to see the benefits in the 3rd quarter dividend (September).  As I said earlier, this purchase also allows me to reach closer and closer to my goals for 2015.

What does everyone think of the purchase?  Think that it was a good timed purchase?  Would you consider this stock or adding to your position?  Think there is value here?  Would love to see everyone’s stand point, thank you!

-Lanny 

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13 thoughts on “Lanny’s Recent Purchase – EMR

    • Div4Son,

      NICE. Have to love them right now and lucky that I know Bert and read Mantra’s blog to really see the true value there. Nice job grabbing them, looking forward to owning more soon actually if they continue to slide.

      -Lanny

    • CD,

      I would agree. Right now, if you can grab it under $50 a share – I say it’s a damn bargain. Look at the average yield over the last 5 years – barely at 3% and it’s almost 80 basis points higher than that right now. 58+ years of growth.. just awesome.

      -Lanny

  1. Lanny,
    I’ve owned EMR for many years, but just recently added to the position for the first time in a long while. Compelling valuation here, solid business. EMR is a high quality, core holding for dividend growth investors. Nice addition to your portfolio.
    -RBD

    • RBD,

      Thanks for coming by and that’s awesome you increased your position again, given how long you’ve owned them – goes to show what valuation we all feel it is at right now. Looking forward to owning more over here, that’s for damn sure. I would agree – it’s a nice core holding for DGIers.

      -Lanny

  2. Lanny,

    Nice call there. Emerson has one of the longest dividend growth streaks around, and I’m pretty confident they’ll continue growing their dividend for years to come. Growth has been a bit challenging lately, but the pretty dramatic fall in the stock price seems to be extremely unwarranted.

    Glad to be a fellow shareholder. Enjoy that nice bump to your dividend income!

    Cheers.

  3. Nice timing indeed! Don’t hold it myself, but it does look like a solid buy. Like you said, a couple steps closer to your goals, that’s awesome!

    Cheers,

    Mike

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