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Why Cummins (CMI) is a Great Dividend Stock Right Now
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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Cummins in Focus
Based in Columbus, Cummins (CMI - Free Report) is in the Auto-Tires-Trucks sector, and so far this year, shares have seen a price change of 6.49%. The engine maker is currently shelling out a dividend of $1.35 per share, with a dividend yield of 2.23%. This compares to the Automotive - Internal Combustion Engines industry's yield of 0.72% and the S&P 500's yield of 1.33%.
Looking at dividend growth, the company's current annualized dividend of $5.40 is up 2.2% from last year. Cummins has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 7.48%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Cummins's current payout ratio is 42%. This means it paid out 42% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for CMI for this fiscal year. The Zacks Consensus Estimate for 2021 is $16.18 per share, representing a year-over-year earnings growth rate of 34.72%.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that CMI is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).
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Why Cummins (CMI) is a Great Dividend Stock Right Now
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Cummins in Focus
Based in Columbus, Cummins (CMI - Free Report) is in the Auto-Tires-Trucks sector, and so far this year, shares have seen a price change of 6.49%. The engine maker is currently shelling out a dividend of $1.35 per share, with a dividend yield of 2.23%. This compares to the Automotive - Internal Combustion Engines industry's yield of 0.72% and the S&P 500's yield of 1.33%.
Looking at dividend growth, the company's current annualized dividend of $5.40 is up 2.2% from last year. Cummins has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 7.48%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Cummins's current payout ratio is 42%. This means it paid out 42% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for CMI for this fiscal year. The Zacks Consensus Estimate for 2021 is $16.18 per share, representing a year-over-year earnings growth rate of 34.72%.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that CMI is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).