Plug Into Electric for an Upside Jolt

Conservative, dividend-paying shares have been in favor lately as alternatives to bonds and bank CDs. Emerson Electric (EMR) has essentially matched the market over the past year. The shares lagged badly over the past twenty-four months though. Note: the charts below do not reflect dividends while the total return figures do. Even a good yield didn't prevent a loss if you bought EMR on May 2, 2011

EMR vs. SPY Yahoo Finance View Chart » View in New Window »

What caused the negative two-year result? Price-to-earnings ratio compression from a too-high earnings multiple. EMR closed at $60.81 on May 2, 2011 with trailing 12-month earnngs per share of $2.87. That put its P/E at 21.2x. Over the past five years EMR has averaged about 15.9x earnings. When the markets were very  beaten up you could catch Emerson below a fourteen multiple....213 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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