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Are You Looking for a High-Growth Dividend Stock? Cummins (CMI) Could Be a Great Choice
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All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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 2.01%. Currently paying a dividend of $1.45 per share, the company has a dividend yield of 2.5%. In comparison, the Automotive - Internal Combustion Engines industry's yield is 1.12%, while the S&P 500's yield is 1.36%.
Taking a look at the company's dividend growth, its current annualized dividend of $5.80 is up 9.8% from last year. Over the last 5 years, Cummins has increased its dividend 5 times on a year-over-year basis for an average annual increase of 7.31%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, Cummins's payout ratio is 36%, which means it paid out 36% 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 $16.37 per share, which represents a year-over-year growth rate of 36.30%.
Bottom Line
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. 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. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, CMI is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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Are You Looking for a High-Growth Dividend Stock? Cummins (CMI) Could Be a Great Choice
All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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 2.01%. Currently paying a dividend of $1.45 per share, the company has a dividend yield of 2.5%. In comparison, the Automotive - Internal Combustion Engines industry's yield is 1.12%, while the S&P 500's yield is 1.36%.
Taking a look at the company's dividend growth, its current annualized dividend of $5.80 is up 9.8% from last year. Over the last 5 years, Cummins has increased its dividend 5 times on a year-over-year basis for an average annual increase of 7.31%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, Cummins's payout ratio is 36%, which means it paid out 36% 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 $16.37 per share, which represents a year-over-year growth rate of 36.30%.
Bottom Line
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. 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. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, CMI is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).