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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Cummins in Focus
Headquartered in Columbus, Cummins (CMI - Free Report) is an Auto-Tires-Trucks stock that has seen a price change of -10.46% so far this year. Currently paying a dividend of $1.57 per share, the company has a dividend yield of 2.89%. In comparison, the Automotive - Internal Combustion Engines industry's yield is 0.62%, while the S&P 500's yield is 1.76%.
Taking a look at the company's dividend growth, its current annualized dividend of $6.28 is up 4% from last year. In the past five-year period, Cummins has increased its dividend 5 times on a year-over-year basis for an average annual increase of 7.81%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Cummins's current payout ratio is 35%. This means it paid out 35% of its trailing 12-month EPS as dividend.
CMI is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2023 is $19.65 per share, representing a year-over-year earnings growth rate of 29.96%.
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.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that CMI is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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Cummins (CMI) Could Be a Great Choice
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Cummins in Focus
Headquartered in Columbus, Cummins (CMI - Free Report) is an Auto-Tires-Trucks stock that has seen a price change of -10.46% so far this year. Currently paying a dividend of $1.57 per share, the company has a dividend yield of 2.89%. In comparison, the Automotive - Internal Combustion Engines industry's yield is 0.62%, while the S&P 500's yield is 1.76%.
Taking a look at the company's dividend growth, its current annualized dividend of $6.28 is up 4% from last year. In the past five-year period, Cummins has increased its dividend 5 times on a year-over-year basis for an average annual increase of 7.81%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Cummins's current payout ratio is 35%. This means it paid out 35% of its trailing 12-month EPS as dividend.
CMI is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2023 is $19.65 per share, representing a year-over-year earnings growth rate of 29.96%.
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.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that CMI is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).