We recently published a list of the 30 Growing Dividend Stocks with Low PE Ratios. In this article, we are going to take a look at where Emerson Electric Co. (NYSE:EMR) stands against other growing dividend stocks.
Value stocks are enjoying a rare period of strength amid this year’s broader market downturn. With earnings season approaching, it remains to be seen whether their recent edge over high-growth stocks will hold.
The S&P Value Index—which includes sectors like banking, consumer staples, and healthcare, featuring companies that trade at relatively low valuations—has fallen around 9% this year. That’s a smaller drop compared to the more than 15% decline seen in the growth-focused counterpart.
Concerns over steep valuations in the tech sector, coupled with a wave of risk aversion triggered by tariffs, have pushed investors to shift from growth to value. While similar shifts haven’t lasted long in the past, some investors believe that this time could be different, as expectations for value-oriented firms are modest enough that they may exceed them when earnings reports begin next month. Dan Morgan, senior portfolio manager at Synovus Trust, made the following comment about value investing:
“The bar has been set pretty low for value stocks compared to the uncertainty surrounding growth names and their ability to deliver on earnings estimates. If value can at least match or slightly beat expectations, the runway is clear for them.”
According to data from Bloomberg Intelligence, analysts are forecasting a 12% decline in first-quarter earnings for value companies compared to the same period last year, while growth companies are expected to post a 20% increase.
Supporters of value stocks believe that these lower expectations are already factored into their relatively modest valuations. On the other hand, optimism surrounding growth stocks—particularly in the tech sector—has soared in recent years, largely driven by enthusiasm over advancements in artificial intelligence.
Historically, value stocks have lagged behind. Over the past 20 years, the S&P 500 Value Index has only outperformed its growth counterpart five times on an annual basis. During that period, the value index climbed 202%, while the growth index surged by 600%. Michael O’Rourke, chief market strategist at JonesTrading Institutional Services, made the following statement:
“Growth is about 40% more expensive; this outperformance of value was very long overdue. Due to the incredible strength of the Magnificent Seven, too many investors crowded into growth thinking it won’t correct.”
Investors often turn to dividend stocks when looking at companies with lower valuations. Dan Lefkovitz, a strategist at Morningstar Indexes, pointed out that dividend-growth stocks—those known for consistently raising their payouts—have underperformed the broader market in 2024. He attributed this to a market that has largely been driven by a handful of fast-growing tech names. However, he also remarked that while dividend-paying stocks may trail during such growth-led rallies, they tend to hold up better during market downturns, as seen in 2022 and 2018.
Companies that consistently raise their dividends are often both profitable and financially stable—traits that become especially important during times of economic downturn.
Engineers analyzing a complex network of process control software and systems.
Our Methodology
For this list, we focused on dividend-paying companies that have consistently paid dividends over the years and have also demonstrated a track record of increasing their payouts. From that group, we considered stocks with forward P/E ratios below 25, as of April 22. The stocks are ranked in ascending order of their P/E ratios.
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Emerson Electric Co. (NYSE:EMR)
Forward P/E Ratio as of April 22: 16.21
Emerson Electric Co. (NYSE:EMR) ranks 19th on our list of the best growing dividend stocks. The American multinational manufacturing company offers products and services related to commercial, industrial, and consumer markets. Over the past five years, the company has actively reshaped its business strategy through a series of acquisitions and divestitures to align with evolving market trends.
In the third quarter of fiscal 2024, Emerson Electric Co. (NYSE:EMR) reported a notable increase in operating cash flow, reaching $1.06 billion compared to $842 million in the same quarter the year before. Free cash flow also saw an uptick, rising to $975 million from $769 million year-over-year. For fiscal 2024, Emerson anticipates distributing around $1.2 billion to shareholders via dividends. Given its current cash reserves, the company also appears well-positioned for continued dividend growth moving forward.
Emerson Electric Co. (NYSE:EMR)’s quarterly dividend comes in at $0.5275 per share and has a dividend yield of 2.11%, as of April 22. The company holds one of the longest dividend growth streaks in the market, spanning 67 years.
Overall, EMR ranks 19th on our list of the best growing dividend stocks with low P/E ratios. While we acknowledge the potential of EMR as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued dividend stock that is more promising than EMR but that trades at 10 times its earnings and grows its earnings at double digit rates annually, check out our report about the dirt cheap dividend stock.
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Disclosure: None. This article is originally published at Insider Monkey.
