REGAL-BELOIT CORPORATION (RBC), ABB Ltd (ADR) (ABB), Emerson Electric Co. (EMR): This Electrical Business Looks Like a Good Buy

Emerson Electric Co. (NYSE:EMR) also has a higher valuation than Regal Beloit. The market values Emerson Electric Co. (NYSE:EMR) at 9.7 times its trailing EBITDA. Emerson Electric Co. (NYSE:EMR) is a provider of engineering services and solutions to a various markets including industrial, commercial and consumer, operating in five main segments Process Management, Industrial Automation, Network Power, Commercial and Residential Solutions and Climate Technologies.

For the full year, the company expects its orders to grow from June, after declines since February. Along with the slow improving demand for industrial goods and telecommunication infrastructures, the energy and residential markets are estimated to remain solid. It expects underlying sales to grow by around 1%, while EPS, excluding goodwill and tax charges, would come in at the lower end of the $3.48-$3.55 range. Free cash flow should stay around $2.7 billion.

Could have offered a much higher dividend yield

In terms of yield, ABB Ltd (ADR) (NYSE:ABB) offers the highest of the group at 3.20%, while Emerson Electric Co. (NYSE:EMR) ranks second with a 2.60% yield. Regal Beloit yields 1.20%. However, Regal-Beloit has the lowest payout ratio at 18%, while the payout ratios of ABB and Emerson Electric Co. (NYSE:EMR) are much higher, at 59% and 57%, respectively. If Regal Beloit increased its payout ratio to the same level as Emerson, it could yield as much as 3.8%.

My Foolish take

REGAL-BELOIT CORPORATION (NYSE:RBC) seems to be a good stock for long-term investors, with consistent cash flow generating capabilities, a strong balance sheet, and a historically increasing dividend payment and low payout ratio. Investors can grab Regal Beloit now at a relatively cheap valuation and with strong prospects for future growth.

The article This Electrical Business Looks Like a Good Buy originally appeared on Fool.com and is written by Anh Hoang.

Anh HOANG has no position in any stocks mentioned. The Motley Fool recommends Emerson Electric Co (NYSE:EMR). Anh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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