The second quarter of 2012 has been a bummer so far, especially when you think back to what was a great first quarter in which the S&P 500 rose more than 12%. But I’m not discouraged. While the recovery may be proceeding at an excruciatingly slow pace, I still think it’s getting there, inch by inch.

I’m also of the opinion stocks will continue to provide the best long-term returns, even though quite a few investors have sworn them off completely. Mind you, stocks may not return the 10% or so a year they’ve delivered as a group during the past three-and-a-half decades, but I believe they’ll significantly outpace bonds and alternatives like gold, both of which could fall dramatically in the shorter-term if the recovery keeps pressing forward. And I think it will.

#-ad_banner-#Some of the best types of stocks to hold in an economy like the one we’re slogging through now are the “old reliables.” I’ve been saying this for a while, so you may know what I mean — large companies with enduring businesses, dominant market share, sturdy balance sheets and healthy dividends.

This time I’d like to tell you about a firm you may not have heard much about — even though it has been around since 1890. It’s not in a terribly glamorous business. Indeed, the company was originally founded to make small motors for electric fans. The product line quickly expanded to include things like sewing machines, dental drills and electric tools.

Today, the company is a $36-billion conglomerate with five segments. Here’s the rundown, with a few examples of what each segment does, though they’re all into a lot more things than I’ve listed here:

• Process management — valves, regulators, control elements
• Industrial automation — electric motors, bearings, wind turbine systems
• Network power — AC/DC power, fire pump controllers, technical and mobile workstations
• Climate technologies — heating, air conditioning and refrigeration systems, thermostats, ceiling fans
• Tools and storage — plumbing tools, storage and display shelving, storage racks

Like I said, the company — Emerson Electric Co. (NYSE: EMR) — is anything but glamorous. In fact, it’s plain boring. And that’s just fine with me, because it has most everything an investor could want, including solid growth potential and a strong dividend. You’d be hard-pressed to find a more reliable company, in my view.

Consider how well it held up between 2006 and 2011, which encompassed some of the worst economic conditions many of us have ever seen. During those tumultuous times, Emerson grew revenue by 1.4% per year from $22.6 billion to $24.1 billion, earnings per share (EPS) by 3.6% a year from $2.66 to $3.17 and dividends by 9.4% a year from $0.92 to $1.44.

Aside from the dividend growth rate, those results aren’t terribly impressive in and of themselves, I know. But they are when you consider Emerson managed to expand when so many other companies were shrinking rapidly or even fighting just to survive.

 
Being cash rich had plenty to do with this, especially where the dividend was concerned. Since Emerson historically maintains a massive cash balance — this ranged from $2.3-$2.8 billion during the past five years — the dividend has typically been very secure, even in bad times. Indeed, few companies can say they’ve raised their dividend for 55 years straight, but Emerson can.

The company is also quickly expanding in faster-growing emerging markets, which already account for 35% of total revenue. I always applaud this strategy, especially for a big blue chip like Emerson, which could have a tough time growing domestically, even in a great economy, due to the company’s large size. But in my opinion, the firm’s a good bet to keep revenue rising at a 6% clip overall, as analysts project. This is because sales have been jumping by double-digits Asia, Latin America and other emerging markets, where revenue growth topped 15% in 2011 and could match that pace again in 2012.

One of Emerson’s latest wins in emerging markets was a major contract announced March 13 to automate and service two new 1,000 megawatt, reduced-emission generators at China’s Jiangsu Xinhai power plant. I haven’t been able to track down the exact terms of the deal, but I suspect it will add hundreds of millions, perhaps even billions, of revenue in coming years, since the two generators will be a major power source for Eastern China.

Risks to Consider: As an industrial company, Emerson is in highly cyclical businesses with performance that’s very closely tied to prevailing economic conditions.

Action to Take –> Emerson’s cyclical nature is an advantage right now. Since the economy has been shakier in recent weeks, Emerson’s stock price has declined enough that the price-to-earnings (P/E) ratio is now about 15, or about 17% below the historical average of 18.

The current stock price of about $48 a share is a good entry point for investors interested in Emerson. Its future looks bright. The projected 2012 dividend of $1.60 a share, for instance, is an 11% gain from the 2011 per-share dividend of $1.44, and it’s good for a yield of 3.3%.

Plus, assuming investors are willing to keep paying 15 times earnings for the stock, the price could reach $63 a share in the next few years, based on estimated EPS growth of 9% annually (15 x 2014 EPS of $4.2 = $63). This represents a 32% gain from the current price and would result in a very solid annualized growth rate of 9.7% during the next three years.