Show me the money, Cummins
However, the biggest allure of Cummins Inc. (NYSE:CMI), other than its cool new technology, might be what it’s doing to increase shareholder value.
In December, Cummins initiated a $1 billion share-repurchase program, which replaced its previous $1 billion program that was almost fully depleted. Although these share repurchases don’t put money directly into shareholders’ pockets, they do make the company appear cheaper on a P/E basis with fewer shares left outstanding.
The real growth, though, has come from its quarterly payouts. Fueled by an average of $884 million in free cash flow over the past four years, Cummins Inc. (NYSE:CMI) has managed to increase its quarterly payout by a whopping 567% over the past decade, including a 90% hike over just the past two years!
*Assumes quarterly payout of $0.50 for remainder of 2013.
Currently paying out $2 a year in stipends, Cummins is yielding 1.7%, which is right around middle of the pack for the diversified machinery sector. But, you’ll be hard-pressed to find a company’s whose share price is up more than 500% since the recession and whose dividend is up 567% over the past decade! Furthermore, that $2 payout represents just 25% of its projected EPS this year, leaving plenty of room left over for share repurchases, research and development, and future dividend hikes, of course!
Foolish roundup
It’s often not easy to find companies that are absolutely driving over their peers, but Cummins is a rare case. Cummins Inc. (NYSE:CMI)’ partnerships and innovation that focuses on fuel efficiency are at the heart of what should be a multi-decade earnings boom. The impetus to switch toward newer and more fuel efficient diesel and LNG-powered engines is certainly there for some of the nation’s largest shippers and Cummins is doing what it can in the form of share buybacks and dividend hikes to reward investors for their patience. The economy will occasionally cause Cummins to shift into a lower growth gear, but make no mistake about it: This company has the horsepower and dividend to deliver for your portfolio.
The article 1 Great Dividend You Can Buy Right Now originally appeared on Fool.com.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of, and recommends, Cummins Inc. (NYSE:CMI) and Westport Innovations Inc. (NASDAQ:WPRT). it also recommends UPS.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
