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2 Auto Stocks With Recent Dividend Hikes Worth Buying
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Investors often pay close attention to dividend increases as these can reflect a company's financial health and stability. It’s typically a positive sign to see these increases that suggest that the company is performing well and has a solid foundation to sustain growth.
Stocks that have a strong dividend track belong to mature companies, are less susceptible to large swings in the market and act as a hedge against economic or political uncertainty as well as stock market volatility. These stocks possess superior fundamentals such as a sustainable business model, a long track of profitability, rising cash flows, good liquidity, a strong balance sheet and some value characteristics that make them promising investments for the long term.
Yesterday, two auto players, trucking giant PACCAR (PCAR - Free Report) and leading truck engine maker Cummins (CMI - Free Report) announced payout hikes. Not only do these stocks have an impressive dividend track record, their payout also appears affordable and safe based on the stocks’ prospects.
A Look at PCAR & CMI’s Dividend History
PACCAR boasts an uninterrupted streak of paying dividends since 1941. For numerous years, the company has consistently provided annual dividends, encompassing both regular quarterly dividends and additional cash dividends, amounting to approximately 50% of its net income. Over the past two decades, PACCAR's shareholder returns have surpassed the performance of the S&P 500 index.
Yesterday, PCAR boosted its quarterly cash dividend by 8% to 27 cents a share. The dividend will be paid out on Sep 7 to shareholders as of Aug 17, 2023. The company has increased its dividend eight times in the past five years, and its payout has grown 4.8% over the same time period. PCAR's payout ratio is currently 15% of earnings. The current dividend yield of the company is 1.16%.(Check PACCAR’s dividend history here).
Cummins raised its dividend for the 14th consecutive year. It increased its quarterly cash dividend by 7% to $1.68 per share. The dividend will be paid out on Sep 7 to shareholders as of Aug 25, 2023. The current dividend yield of the company is 2.44%. CMI increased its dividend six times in the past five years, and its payout has grown 7.42% over the same time period. Its payout ratio of 35 also looks quite sustainable on the back of solid prospects. (Check Cummins’ dividend history here).
For those interested in reaping income from their investments, let’s take a closer look at both the stocks.
PACCAR
PACCAR is one of the leading names in the trucking business, with reputed brands like Kenworth, Peterbilt and DAF. The DAF lineup, comprising XF and XG models (launched in 2021) and the XD model (launched in 2022), augurs well. The company’s new launches have improved the product mix.
PACCAR derives the bulk of its revenues from truck sales. Continued growth in the aftermarket parts — which is a high margin and a less cyclic business — thanks to the rampant adoption of its proprietary MX engine also bodes well. High truck utilization and increased average fleet age are positively impacting PACCAR Parts’ results. An expanding network of parts distribution centers, dealer locations and independent TRP stores, along with managed dealer inventory and innovative e-commerce systems, is aiding the PACCAR Parts segment’s prospects.
Investment in advanced technologies offers growth visibility. At the CES 2023, Transportation Hall, PACCAR displayed a battery-powered Peterbilt 579EV, a hydrogen fuel-cell Kenworth T680E and a Peterbilt autonomous Model 579. PACCAR’s Peterbilt Model 579 equipped with the Aurora self-driving system strengthens its portfolio of next-gen offerings. The Kenworth T680E battery-electric truck and Peterbilt 579EV showcase PACCAR’s commitment to providing emissions-free commercial vehicles. Accelerated efforts toward electrification, connected vehicle services and advanced driver-assistance system options are set to bolster PACCAR’s prospects.
PACCAR’s strong balance sheet is complemented by A+ and A1 credit ratings assigned by Standard & Poor's and Moody's, respectively. The company's total debt-to-capital ratio stands at 0.46, lower than its industry's 0.62. The low leverage increases its financial flexibility to tap into growth opportunities.
The Zacks Consensus Estimate for 2023 sales and EPS implies year-over-year growth of 15.6% and 36.5%, respectively. PCAR surpassed earnings in the trailing four quarters, the average surprise being 16.6%. The company has a VGM Score of A.
Cummins
Cummins is the largest engine producer in the world and maintains a diverse global footprint. Its commitment to moving toward a carbon-neutral future is commendable. Impressive product portfolio, strong geographic diversification and broad global distribution network boost its long-term prospects. The company's leadership in key technologies for zero tailpipe emissions in commercial and industrial applications, and additional efforts to strengthen its foothold in the domain augur well.
Cummins is making significant strides in inorganic growth through the acquisitions of Jacobs Vehicle Systems, Meritor and the Siemens Commercial Vehicles business. The buyout of Meritor has positioned Cummins as a leading provider of integrated powertrain solutions across internal combustion and electric power applications. The Hydrogenic Corp. buyout, investment in Loop Energy and partnership with NPROXX have expanded Cummins’ fuel cell and hydrogen-processing technology capabilities. The introduction of a 15-liter natural gas engine for heavy-duty trucks is a key part in Cummins’ path to a green energy future and offers growth visibility.
Cummins’ total debt-to-capital ratio stands at a manageable 0.42. As part of its commitment to increasing shareholder value, Cummins sticks to its plan of returning nearly 50% of its operating cash flow to shareholders in the form of dividends and share repurchases, which is commendable.
The Zacks Consensus Estimate for 2023 sales and EPS implies year-over-year growth of 17% and 31%, respectively. The consensus mark for CMI’s 2024 EPS is pegged at $20.27, implying growth of 2.4% year over year. The company has a VGM Score of A.
Bottom Line
Dividends provide a solid level of reassurance to investors. Typically, companies boost payouts when the business is fruitful and they’re confident in their prospects. PCAR and CMI are sound investments in the auto space to rev up your portfolio returns. Both the stocks carry a Zacks Rank #2 (Buy).
Image: Bigstock
2 Auto Stocks With Recent Dividend Hikes Worth Buying
Investors often pay close attention to dividend increases as these can reflect a company's financial health and stability. It’s typically a positive sign to see these increases that suggest that the company is performing well and has a solid foundation to sustain growth.
Stocks that have a strong dividend track belong to mature companies, are less susceptible to large swings in the market and act as a hedge against economic or political uncertainty as well as stock market volatility. These stocks possess superior fundamentals such as a sustainable business model, a long track of profitability, rising cash flows, good liquidity, a strong balance sheet and some value characteristics that make them promising investments for the long term.
Yesterday, two auto players, trucking giant PACCAR (PCAR - Free Report) and leading truck engine maker Cummins (CMI - Free Report) announced payout hikes. Not only do these stocks have an impressive dividend track record, their payout also appears affordable and safe based on the stocks’ prospects.
A Look at PCAR & CMI’s Dividend History
PACCAR boasts an uninterrupted streak of paying dividends since 1941. For numerous years, the company has consistently provided annual dividends, encompassing both regular quarterly dividends and additional cash dividends, amounting to approximately 50% of its net income. Over the past two decades, PACCAR's shareholder returns have surpassed the performance of the S&P 500 index.
Yesterday, PCAR boosted its quarterly cash dividend by 8% to 27 cents a share. The dividend will be paid out on Sep 7 to shareholders as of Aug 17, 2023. The company has increased its dividend eight times in the past five years, and its payout has grown 4.8% over the same time period. PCAR's payout ratio is currently 15% of earnings. The current dividend yield of the company is 1.16%.(Check PACCAR’s dividend history here).
PACCAR Inc. Dividend Yield (TTM)
PACCAR Inc. dividend-yield-ttm | PACCAR Inc. Quote
Cummins raised its dividend for the 14th consecutive year. It increased its quarterly cash dividend by 7% to $1.68 per share. The dividend will be paid out on Sep 7 to shareholders as of Aug 25, 2023. The current dividend yield of the company is 2.44%. CMI increased its dividend six times in the past five years, and its payout has grown 7.42% over the same time period. Its payout ratio of 35 also looks quite sustainable on the back of solid prospects. (Check Cummins’ dividend history here).
Cummins Inc. Dividend Yield (TTM)
Cummins Inc. dividend-yield-ttm | Cummins Inc. Quote
For those interested in reaping income from their investments, let’s take a closer look at both the stocks.
PACCAR
PACCAR is one of the leading names in the trucking business, with reputed brands like Kenworth, Peterbilt and DAF. The DAF lineup, comprising XF and XG models (launched in 2021) and the XD model (launched in 2022), augurs well. The company’s new launches have improved the product mix.
PACCAR derives the bulk of its revenues from truck sales. Continued growth in the aftermarket parts — which is a high margin and a less cyclic business — thanks to the rampant adoption of its proprietary MX engine also bodes well. High truck utilization and increased average fleet age are positively impacting PACCAR Parts’ results. An expanding network of parts distribution centers, dealer locations and independent TRP stores, along with managed dealer inventory and innovative e-commerce systems, is aiding the PACCAR Parts segment’s prospects.
Investment in advanced technologies offers growth visibility. At the CES 2023, Transportation Hall, PACCAR displayed a battery-powered Peterbilt 579EV, a hydrogen fuel-cell Kenworth T680E and a Peterbilt autonomous Model 579. PACCAR’s Peterbilt Model 579 equipped with the Aurora self-driving system strengthens its portfolio of next-gen offerings. The Kenworth T680E battery-electric truck and Peterbilt 579EV showcase PACCAR’s commitment to providing emissions-free commercial vehicles. Accelerated efforts toward electrification, connected vehicle services and advanced driver-assistance system options are set to bolster PACCAR’s prospects.
PACCAR’s strong balance sheet is complemented by A+ and A1 credit ratings assigned by Standard & Poor's and Moody's, respectively. The company's total debt-to-capital ratio stands at 0.46, lower than its industry's 0.62. The low leverage increases its financial flexibility to tap into growth opportunities.
The Zacks Consensus Estimate for 2023 sales and EPS implies year-over-year growth of 15.6% and 36.5%, respectively. PCAR surpassed earnings in the trailing four quarters, the average surprise being 16.6%. The company has a VGM Score of A.
Cummins
Cummins is the largest engine producer in the world and maintains a diverse global footprint. Its commitment to moving toward a carbon-neutral future is commendable. Impressive product portfolio, strong geographic diversification and broad global distribution network boost its long-term prospects. The company's leadership in key technologies for zero tailpipe emissions in commercial and industrial applications, and additional efforts to strengthen its foothold in the domain augur well.
Cummins is making significant strides in inorganic growth through the acquisitions of Jacobs Vehicle Systems, Meritor and the Siemens Commercial Vehicles business. The buyout of Meritor has positioned Cummins as a leading provider of integrated powertrain solutions across internal combustion and electric power applications. The Hydrogenic Corp. buyout, investment in Loop Energy and partnership with NPROXX have expanded Cummins’ fuel cell and hydrogen-processing technology capabilities. The introduction of a 15-liter natural gas engine for heavy-duty trucks is a key part in Cummins’ path to a green energy future and offers growth visibility.
Cummins’ total debt-to-capital ratio stands at a manageable 0.42. As part of its commitment to increasing shareholder value, Cummins sticks to its plan of returning nearly 50% of its operating cash flow to shareholders in the form of dividends and share repurchases, which is commendable.
The Zacks Consensus Estimate for 2023 sales and EPS implies year-over-year growth of 17% and 31%, respectively. The consensus mark for CMI’s 2024 EPS is pegged at $20.27, implying growth of 2.4% year over year. The company has a VGM Score of A.
Bottom Line
Dividends provide a solid level of reassurance to investors. Typically, companies boost payouts when the business is fruitful and they’re confident in their prospects. PCAR and CMI are sound investments in the auto space to rev up your portfolio returns. Both the stocks carry a Zacks Rank #2 (Buy).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.