Wednesday, September 24, 2014

Recent Buy

Whenever I make a new purchase for my portfolio I feel it's only fair to get a post written giving all of the juicy details. I want to be as transparent as possible with my journey to reach financial independence through dividend growth investing. Being open about the moves I make allows for better discussion with all of you and helps spread ideas around as well as letting me create my own "investing journal" to chronicle why I purchased a company in the first place and that way I can revisit if something changes and make the decision on whether to continue owning the company or not.
I mentioned a little over a week ago that I was very interested in adding to my position in Emerson Electric (EMR).  Well, yesterday I did just that.  Unfortunately it wasn't a chance to average down my cost basis but that's not too surprising since I initiated the position back in 2012.  I purchased 25 shares of Emerson Electric for $63.77 per share.  After commission my per share cost basis came to $64.09.  Based on the current quarterly dividend of $0.43, these shares will carry a YOC of 2.68% and provide $43.00 in annual dividends.  Even better news is that Emerson Electric has been increasing their dividend for 57 consecutive years and I fully expect year 58 to be announced like clockwork in November of this year.  So I'll get an immediate increase in payout and YOC in just a few short weeks.

Something that I really like about Emerson Electric is that they provide products and services to a wide variety of industries.  From municipalities, oil & gas reservoirs, power plants, pharmaceuticals, beverage, refrigeration and the list goes on and on.  The large cross-section of industries allows for a bit smoother ride compared to other industrial related companies.  Even better is that they are about improving processes through better measurement and efficiency which is just the sort of thing companies are interested in when the economy falls on hard times.

Shares of Emerson Electric aren't exactly cheap here since they are trading at a 22.77 TTM P/E ratio but the FY 2015 forward P/E ratio looks a lot better at just 15.75.  Analysts expect solid revenue growth of 4.60% in FY 2015 with 5 year projected earnings growth of 9.28%.  At first glance the payout ratio seems a bit high at 60% but the payout ratio based on free cash flow is much better at just 39.90% for FY 2013.  The 1 year target price from Yahoo!Finance is $71.50 and Morningstar's fair value price is $69.00.  I think Emerson Electric represents pretty good value here for those looking for industrial exposure in an otherwise expensive environment.

My forward 12-month dividends are now at $5,138.64 which is 93.43% of the way towards my revised goal of $5,500 by the end of the year.

Make sure you follow me on Twitter@JC_PIP to get quick updates about purchases that I'm making.

I've updated my Portfolio page to reflect this purchase.

What companies are on you looking to buy?  

12 comments:

  1. Looks to be a nice purchase. At close to 3% yield and 1 yr target representing a 10% upside, it is great. And another step closer towards your 5500 goal.

    ReplyDelete
    Replies
    1. DGJ,

      Would love to add some more if we see a 3.00% yield. Man the markets sure have been acting crazy this week. Inching my way towards $5,500. We'll see if I get there because I'll probably hoard a bit more cash than normal to close out the year.

      Thanks for stopping by!

      Delete
  2. I am a holder of EMR too. Long term hold. Great track record with long dividend history. Whats not too like.

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    Replies
    1. A-G,

      Wish I was a longer term holder than just a little over 2 years but we've got to start somewhere. EMR definitely has a great track record and I expect a much better dividend increase this year from them.

      Thanks for stopping by!

      Delete
  3. PIP,
    Emerson is one of my bigger holdings. Solid company, strong dividend and growth. I looked at the valuation a few weeks ago when I was comparing it to PH. Good time to buy. I own it through the DRIP and not putting any new money to it at the moment, mainly to diversify elsewhere.
    -RBD

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    Replies
    1. RBD,

      I really like EMR's product mix. If the economy tanks other companies will look to become more efficient productive which is right up their alley. Hoping to continue building up the position and see what it looks like in 20 years.

      Thanks for stopping by!

      Delete
  4. EMR is always one of those companies I've heard of, but never sat down and actually looked at. Seems to be a great one, and 57 years of dividend increases? Wow!

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    Replies
    1. DividendDeveloper,

      It's funny when you look around for the company names on the products near you. Emerson makes the a/c controls for my work. The 50+ year club is pretty rare so adding a few more of them to my holdings is always welcomed. I expect them to give a solid increase this year as well.

      Thanks for stopping by!

      Delete
  5. EMR is on our watch list. We've been keeping an eye on the stock for a little while now. As others have already said, EMR is great company with very solid dividends that you should be able to depend on for years to come. Definitely the kind of company we will look to depend on in retirement. Nice buy...and best of luck reaching your new goal of $5,500! AFFJ

    ReplyDelete
    Replies
    1. AFFJ,

      I think EMR would make a great addition to just about any DG portfolio and expect to see plenty more years/decades of increases from them. We'll see if I reach the $5,500 level. If there weren't the issues with Lucas then I'd be pretty confident but since there's issues and potential time off of work I'll need to hoard a bit more cash than usual.

      Thanks for stopping by!

      Delete
  6. JC,

    Great company. How do you go wrong with 50+ years of dividend increases? :)

    Love the business, and they've done well for a very long time. I see no reason to believe that won't continue. Glad to be a fellow shareholder!

    Best regards.

    ReplyDelete
  7. hi PIP,

    Nice purchase! As a former employee of EMR, they were perhaps the company most focused on their financial targets (in a good way) that I've worked at and I enjoyed working there. I bought EMR shares last month and I'm looking forward to adding more in the future.

    Best wishes,
    -DL

    ReplyDelete