REGAL-BELOIT CORPORATION (RBC): This Electric Company Is a Good Buy

Emerson Electric Co. (NYSE:EMR) is also valued higher than REGAL-BELOIT CORPORATION (NYSE:RBC). At $55.60 per share, Emerson Electric is worth $40 billion on the market. It is valued at 8.53 times its trailing EBITDA.

In 2013, Emerson Electric Co. (NYSE:EMR) expected the sales growth to stay in the range of 1.5% to 2.5%. Latin America and Middle East & Africa would be the two fastest growth segment, with 8%-10% range and 6%-10% range, respectively. The U.S., Canada and Europe regions were expected to have sluggish growth, in the range of -2% to 2%.

For the full year 2013, Emerson Electric estimated that the net sales would be around $24.7 to $25 billion while the EPS might come in at $3.48 to $3.58 per share. It also expected to pay it shareholders $1.64 per share in dividend. At the current trading price, its dividend yield is around 3%.

Income investors might be discouraged because of REGAL-BELOIT CORPORATION (NYSE:RBC)’s low dividend yield. However, its payout ratio is much lower than the other two companies, at only 17%, while the payout ratios of ABB and Emerson Electric are 60% and 57%, respectively. If Regal Beloit pays around 60% of its earnings in dividend, its dividend yield should reach nearly 4.6%.

My Foolish take

With the consistent growth in revenue and net earnings, good cash flow generating capabilities, conservative capital structure and low valuation, Regal Beloit could be a good pick for long-term investors at its current trading price. Moreover, the company had the potential to offer shareholders quite juicy dividend yield if it increased its payout ratio to the payout level of both ABB and Emerson Electric.

The article This Electric Company Is 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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