Cummins Inc. (NYSE:CMI) has announced that it will be increasing its dividend on the 5th of September to $1.82, marking an 8.3% increase from last year’s payment of $1.68 during the same period. This will bring the dividend yield to a favorable 2.4%, providing a nice boost to shareholder returns.
Prior to this announcement, Cummins’ dividend was well covered by both cash flow and earnings, indicating that a significant portion of earnings is being reinvested back into the business. With projected EPS growth of 75.5% in the next year, the payout ratio is estimated to be 30%, which is within a sustainable range for the dividend.
Cummins has a strong track record of paying stable dividends, with a compound annual growth rate (CAGR) of approximately 10% over the past few years. However, the company has not seen much change in its earnings per share over the last five years, which may limit the growth prospects for the dividend in the future.
While the dividend looks viable moving forward, investors should be mindful of the company’s history of pushing the boundaries of sustainability. Market movements show the value of a consistent dividend policy, but investors should also consider other factors before investing in a stock. Additionally, it is important to note that this article is general in nature and does not constitute financial advice.