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Cummins' (NYSE:CMI) Upcoming Dividend Will Be Larger Than Last Year's

·2-min read

Cummins Inc. (NYSE:CMI) has announced that it will be increasing its dividend from last year's comparable payment on the 1st of September to $1.57. This takes the dividend yield to 2.8%, which shareholders will be pleased with.

See our latest analysis for Cummins

Cummins' Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last dividend was quite easily covered by Cummins' earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

The next year is set to see EPS grow by 45.6%. If the dividend continues on this path, the payout ratio could be 30% by next year, which we think can be pretty sustainable going forward.

historic-dividend
historic-dividend

Cummins Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2012, the annual payment back then was $1.60, compared to the most recent full-year payment of $6.28. This means that it has been growing its distributions at 15% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Cummins has seen EPS rising for the last five years, at 10% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Cummins Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Cummins is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Cummins that investors need to be conscious of moving forward. Is Cummins not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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