Cummins (NYSE:CMI) Is Paying Out A Larger Dividend Than Last Year

Cummins Inc. (NYSE:CMI) has announced that it will be increasing its periodic dividend on the 7th of September to $1.68, which will be 7.0% higher than last year's comparable payment amount of $1.57. This takes the dividend yield to 2.5%, which shareholders will be pleased with.

Check out our latest analysis for Cummins

Cummins' Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, Cummins' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 17.3%. If the dividend continues on this path, the payout ratio could be 34% by next year, which we think can be pretty sustainable going forward.

Cummins Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the annual payment back then was $2.00, compared to the most recent full-year payment of $6.28. This means that it has been growing its distributions at 12% 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

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Cummins has grown earnings per share at 26% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like Cummins' Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend 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. For instance, we've picked out 1 warning sign for Cummins that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.