Exploring the Sustainability and Growth of Cummins Inc's Dividends
Cummins Inc (CMI, Financial) recently announced a dividend of $1.68 per share, payable on 2024-06-06, with the ex-dividend date set for 2024-05-23. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Cummins Inc's dividend performance and assess its sustainability.
What Does Cummins Inc Do?
Cummins is the top manufacturer of diesel engines used in commercial trucks, off-highway machinery, and railroad locomotives, in addition to standby and prime power generators. The company also sells powertrain components, which include transmissions, turbochargers, aftertreatment systems, and fuel systems. Cummins is in the unique position of competing with its primary customers, heavy-duty truck manufacturers, who make and aggressively market their own engines. Despite robust competition across all its segments and increasing government regulation of carbon emissions, Cummins has maintained its leadership position in the industry.
A Glimpse at Cummins Inc's Dividend History
Cummins Inc has maintained a consistent dividend payment record since 1986, with dividends currently distributed on a quarterly basis. Cummins Inc has increased its dividend each year since 1997, earning it the status of a dividend aristocrat—a title reserved for companies that have increased their dividend annually for at least the past 27 years. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Cummins Inc's Dividend Yield and Growth
As of today, Cummins Inc currently has a 12-month trailing dividend yield of 2.28% and a 12-month forward dividend yield of 2.31%, suggesting an expectation of increased dividend payments over the next 12 months. Over the past three years, Cummins Inc's annual dividend growth rate was 7.20%, extending to 7.70% per year over a five-year horizon, and 10.00% over the past decade. Based on Cummins Inc's dividend yield and five-year growth rate, the 5-year yield on cost of Cummins Inc stock as of today is approximately 3.30%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. As of 2024-03-31, Cummins Inc's dividend payout ratio is 1.26, which may suggest concerns about the sustainability of the company's dividends. However, Cummins Inc's profitability rank of 8 out of 10, combined with a decade of positive net income, supports good profitability prospects.
Growth Metrics: The Future Outlook
Cummins Inc's growth rank of 8 out of 10 suggests a strong growth trajectory relative to its competitors. The company's revenue per share and 3-year revenue growth rate of approximately 21.50% per year outperforms 82.24% of global competitors. Cummins Inc's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. Lastly, the company's 5-year EBITDA growth rate of -11.90% also outperforms 13.68% of global competitors.
Conclusion
Considering Cummins Inc's robust dividend history, consistent growth in dividend payments, and strong financial health indicated by its profitability and growth metrics, the company appears well-positioned to maintain its dividend payments. However, investors should keep an eye on the payout ratio and broader economic factors that could impact future profitability. For those seeking to explore high-dividend yield opportunities, GuruFocus Premium users can utilize the High Dividend Yield Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
