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.
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I've updated my Portfolio page to reflect this purchase.
What companies are on you looking to buy?