Emerson Electric Co. (NYSE:EMR) is about to trade ex-dividend in the next four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Emerson Electric's shares on or after the 16th of May will not receive the dividend, which will be paid on the 10th of June.

The company's next dividend payment will be US$0.525 per share, on the back of last year when the company paid a total of US$2.10 to shareholders. Calculating the last year's worth of payments shows that Emerson Electric has a trailing yield of 1.8% on the current share price of US$115.55. If you buy this business for its dividend, you should have an idea of whether Emerson Electric's dividend is reliable and sustainable. As a result, readers should always check whether Emerson Electric has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Emerson Electric

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Emerson Electric paid out more than half (62%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Emerson Electric paid out more free cash flow than it generated - 132%, to be precise - last year, which we think is concerningly high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.

While Emerson Electric's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to Emerson Electric's ability to maintain its dividend.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're not enthused to see that Emerson Electric's earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Emerson Electric has delivered an average of 2.5% per year annual increase in its dividend, based on the past 10 years of dividend payments.

The Bottom Line

Has Emerson Electric got what it takes to maintain its dividend payments? It's not great to see earnings per share have been flat and that the company paid out an uncomfortably high percentage of its cash flow over the past year. Cash flows are typically more volatile than earnings, but this is still not what we like to see. It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.

Although, if you're still interested in Emerson Electric and want to know more, you'll find it very useful to know what risks this stock faces. For example, we've found 1 warning sign for Emerson Electric that we recommend you consider before investing in the business.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.