Recent Buy – Emerson Electric (EMR)

By | January 20, 2018

Just wanted to bring to your attention that I recently added Emerson Elecrtric (EMR) to my dividend portfolio.  EMR is a company that I’ve considered numerous times before but didn’t really have the will power to pull the trigger.  Well, it’s a New Year.  And with that comes new motivation.  So, here are my reasons for adding EMR.

The Constraints

My portfolio is held at two separate institutions.  The first is Capital One Investing and the other is Computershare.  With Capital One Investing, I participate in their Advantage program.  Basically, I invest in 12 stocks one time per month for $12 a month.  That’s a whopping $144 a year in brokerage fees to participate in a psuedo DRIP.  At present, I’m unwilling to spend more than at Capital One Investing.  In fact, I will pay $1 extra per month for every additional company I invest in.

The $12 per month is kind of high, but because I’m invested in 12 stocks, the average price is about $1 per stock.  Also, because I invest $1010 per month, the $12 for brokerage fees to me is a reasonable 1.19% of my investment amount.

However, things are a bit different with Computershare.  There, I choose to invest in no-fee DRIPs.  So, I don’t pay any fees for investing directly with the companies through their Transfer Agent.

So, one of the reasons why I chose EMR is because I can invest in their no-fee DRIP at Computershare.

More About EMR

Of course, fees are not the only reason to invest in a company.  I like EMR because, for starters, it’s a Dividend King.  EMR has raised it’s dividend each year for the past 60 years.

Here is Sure Dividend’s description of EMR:

“Emerson Electric is a multinational industrial service firm with a market capitalization of ~$38 billion. Founded in 1890, Emerson Electric has more than 110,000 employees and 205 manufacturing locations across the globe.”

EMR is a solid company with a wide moat and is a staple in many dividend portfolios.  Still, all is not rosy with EMR.  For starters, I’m not a huge fan of their current dividend yield which is at 2.66%.  I rather prefer to invest in companies with a minimum of 3% dividend yield.  However, I’m hoping that yield on cost will work out in my favor decades from now when I’m ready to reap the benefits from my dividend investing.

Additionally, the current price of EMR is $73.14, which is very close to its 52 week high $74.45.  So, I realize I might not be getting in at the best price.  However, I’m a long term investor and I dollar cost average my way into stocks.  I plan to do the same with Emerson Electric.

I purchased $250 worth of EMR and am now the proud owner of 3.2 shares. This added $6.22 to my forward annual dividends. I plan to contribute $80 per month to the company.

Conclusion

What do you think of my recent buy?  Let me know your thoughts by commenting below.

 

24 thoughts on “Recent Buy – Emerson Electric (EMR)

  1. Tom @ Dividends Diversify

    Hi DP, I own EMR also. Although it is one of my smaller positions I have held it for many years. I hold it for the consistent dividend growth and exposure to the industrial sector. Just from memory, they have been restructuring over the past few years and also were hurt by lower oil prices in their oil services segment. As a result the dividend growth has slowed dramatically. My guess is dividend growth will pick up again with the corporate tax cut, higher oil prices and results from restructuring their business. I think it is a really solid company and plan to hold for the long term like you. Thanks for bringing them up, I haven’t thought about EMR much recently. That is usually a good sign for me that EMR is a slow and steady company that will help me win the race over the long term. Unlike one of my other industrial holdings (GE), I rarely see EMR in the news.

    On a separate note, have you considered a Vanguard brokerage account? You can drip all your stocks for free. I suspect that they have a higher per trade commission though which may have taken you in a different direction?

    Tom
    Tom @ Dividends Diversify recently posted…What I Have Been Investing in LatelyMy Profile

    Reply
    1. Dividend Portfolio Post author

      Tom, I had considered a brokerage account back when I was starting this blog. The issue is the per trade cost to purchase stocks. My problem is that I don’t want to pay $7 per trade per stock. So, if I have 16 stocks in my portfolio, I would be paying $112 per month in fees. I’m not sure what Vanguard’s current trade cost is, and so I’ll give them another look. Dripping might be free at vanguard, but it doesn’t take into account the monthly purchase of stocks that I do. Additionally, I know that I could automatically invest in Vanguard index funds (and maybe vanguard ETFs) for free. However, I prefer to invest in individual stocks at the moment. I should note that I do have a Vanguard account for my Roth IRA and it would have been nice to also have their brokerage account, but I think it was too costly. I’ll double check their fees, however.

      For an investor like myself who just wants to automatically have money come from their paycheck into a brokerage account to automatically purchase individual stocks (as opposed to funds), there are not a lot of options. Capital One Investing (formerly Sharebuilder) solved that problem years ago. Not too many companies allow this method of investing however. I’m a fan of Robinhood. But Robinhood doesn’t allow the automatic purchasing of stocks, and they don’t allow fractional shares or provide DRIPs. Maybe one day they’ll mirror the service provided by Capital One Investing, but until then, I’ll stick with Capital One Investing for now (unless I find something better).

      Thanks for the suggestion though.

      Reply
        1. Dividend Portfolio Post author

          Maybe I don’t understand. You’re saying that I could pay $7 to trade for the first 25 trades? Because I DCA my way into my portfolio, and I have 16 stocks in my portfolio, if they were all at vanguard, then I would hit the first 25 trades in two months. If I’m paying $7 per trade after that, it gets exponentially expensive. I’m going to double check with Vanguard to ensure I understand. Vanguard definitely make sense if I was interested in vanguard ETFs or funds.

          Reply
  2. Tom @ Dividends Diversify

    Hi DP, Knowing you, I was pretty sure you had investigated and thought it out. I started with Sharebuilder many years ago for the same reasons you mention. As our assets grew, I transitioned to and consolidated everything at Vanguard. Their stock transaction costs become cheaper with greater levels of assets. It just takes time. One of the few advantages of getting older I guess. 🙂 Tom
    Tom @ Dividends Diversify recently posted…What I Have Been Investing in LatelyMy Profile

    Reply
    1. Dividend Portfolio Post author

      Glad it worked out Tom. Yea, I’m definitely going to give Vanguard another look, and I’m sure it’s going to help that I already have my Roth IRA there.

      Reply
  3. More Dividends

    Nice addition DP. I also am a shareholder in Emerson Electric. They are a great company with an awesome history of raising their dividends. I was disappointed a few months ago when they weren’t able to acquire Rockwell Automation. Despite that, I do like that management wasn’t willing to overpay too much to make the deal happen. I too intend to hold this for the long term! Great buy and thanks for sharing.
    More Dividends recently posted…The Big Drop: How To Grow Your Wealth During the Coming Collapse by James RickardsMy Profile

    Reply
    1. Dividend Portfolio Post author

      Thanks MD. I’m hoping it works out in the end.

      Reply
  4. p2035

    Hi, DP. EMR looks a bit pricey purchase. P/E is sky-high 28. Their earnings are bit down and their share price is up which makes no economical seance :/ I understand that this is a good buy in L/T , but still looks very price. Sadly same problem is with most of good companies lately – overpriced. Balance looks quite strong so if the company will grow, business is also has good potential, so in the end this might end up as a good buy 🙂 Either way keep up the good work pilling up thous dividends 🙂
    p2035 recently posted…Recent buy – American Electric PowerMy Profile

    Reply
    1. Dividend Portfolio Post author

      Thanks P2035. I hear what you’re saying in terms of the fact that the company seems like it’s overpriced. Because I DCA my way into my stock portfolio, I’m less concerned about initiating a position if the company is over priced, because I’ll be continually investing into it no matter what. That’s not to say I don’t prefer a good deal, or to buy when the stock is undervalued. However, price for me is only one of numerous factors I look into when deciding to purchasing the stock. But, I’m with you. I hope to keep pulling those dividends from EMR long term.

      Reply
      1. Frankie

        My first reaction was to look at that valuation too – the PE ratio is definitely way higher than it was a couple of years ago, but if you plan to keep accumulating then it’s probably not a big deal. Who knows what the share price and valuation will do anyway in the near term, especially if the business keeps powering along!

        Reply
        1. Dividend Portfolio Post author

          So valuation is definitely an important thing to consider, but it’s generally less of a factor for me based on how I choose to invest. Because I DCA my way into a stock for the long term, I’m resigned to the idea that I’ll be buy stocks at time at a discount and at other times while the stock is overpriced. I didn’t want to wait to get in at the perfect price because who know when if ever that time will come? Thanks for stopping by Frankie.

          Reply
  5. The Dividend Karma

    Great Pick, I do not hold EMR (except via funds) but I do like the stock and its valuation. However, I think there might be little better opportunities outside so I recently have bought into some O&G, REITs and Utility sector stocks. I wish you best for your stock purchases. I like your pick.

    TDK.

    Reply
    1. Dividend Portfolio Post author

      Thanks a lot TDK. Speaking of utilities, I could use some diversification in that area. I’m considering SO, but haven’t made the decision yet. Plus, with this purchase, it may very well be a while before I add another stock to my portfolio. Good luck to us both in exploring our recent opportunities.

      Reply
  6. Dividend Diplomats

    DP –

    Just owning high quality companies is the right thing. Consistently buying, dollar cost averaging, etc.. to a new position and building on that is what it’s about. Hope their dividend growth gets better down the line.

    -Lanny

    Reply
    1. Dividend Portfolio Post author

      I also hope the same Lanny. In the mean time, I will definitely be DCAing my way into the stock.

      Reply
    1. Dividend Portfolio Post author

      No worries Mike. Funds are definitely a viable strategy as well for long term investing. Thanks for stopping by.

      Reply
    1. Dividend Portfolio Post author

      That’s the idea Brian. I expect to add at least one share per month!

      Reply
    1. Dividend Portfolio Post author

      Thanks PCI. I’m definitely more of the lazy investor. I love the idea of set it and forget it, and even though I track the dividends I receive on a monthly basis, I really don’t concern myself with current market valuations which may be positive or negative depending on the day. I’m not saying this approach is right, or even recommended, for everyone. I am saying that it’s right for me.

      Reply
  7. Dividend Daze

    Nice buy! I really like EMR but haven’t got around to adding it to my portfolio yet. Smart to buy some utilities while that sector is down. The company has great background and should should be a nice long term hold.

    Reply
    1. Dividend Portfolio Post author

      Hoping it really is a nice long term hold too Div Daze. But who knows, maybe when you do buy EMR, it will be at a better valuation.

      Reply

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