Cummins Inc. (NYSE:CMI): A Dividend Stock with Steady Growth and Financial Strength

For investors looking for steady income from dividend stocks, a methodical screening process can find companies with good basics and lasting payout practices. One useful way is to sort for stocks with good dividend ratings while keeping acceptable profitability and financial condition scores. This method helps prevent the typical mistake of pursuing high-yield stocks that could have business problems, concentrating instead on firms with established histories of dividend steadiness and the monetary ability to keep payouts during different economic times.

Dividend Strength and Lasting Nature

Cummins Inc. (NYSE:CMI) offers a strong example for dividend investors, receiving a ChartMill Dividend Rating of 7 out of 10. The company displays a number of traits that dividend investors usually look for:

• Steady dividend growth: Cummins has raised its dividend at a yearly rate of 7.08% over recent years, indicating a regular dedication to giving value to shareholders
• Good payment history: The company has continued dividend payments for at least 10 years without cuts, giving trust in its distribution practice
• Maintainable payout ratio: With just 38.53% of earnings used for dividend payments, Cummins keeps a careful method that permits reinvestment while aiding future dividend growth
• Earnings support: The company's dividend growth stays maintainable as earnings are increasing more quickly than dividend rises

These dividend traits match the screening method's focus on lasting income, as firms with increasing dividends and careful payout ratios usually show monetary discipline and a long-term view.

Profitability Supporting Dividend Payments

Cummins gets a ChartMill Profitability Rating of 7, showing good operational results that back its dividend practice. The company's profitability numbers give the needed base for ongoing dividend distributions:

• Good returns: Return on equity of 22.12% puts Cummins in the high group of its industry, doing better than 88.46% of similar companies
• Effective capital use: Return on invested capital of 10.92% is higher than that of 76.15% of industry rivals
• Acceptable margins: Operating margin of 12.01% and profit margin of 7.94% both rate above industry averages
• Upward movements: Recent gain in return on invested capital signals improving profitability

These profitability measures directly back the screening plan's concentration on firms with enough earnings ability to maintain dividends, as good returns and margins supply the cash flow needed for regular shareholder distributions.

Financial Condition Aiding Long-Term Dividends

With a ChartMill Health Rating of 5, Cummins keeps acceptable financial steadiness to handle economic changes while continuing dividend payments:

• Bankruptcy concern: An Altman-Z score of 4.44 shows very little bankruptcy worry and places Cummins in the top 70% of its industry for financial stability
• Debt handling: A debt-to-free-cash-flow ratio of 3.34 implies the company could pay off all debt in about three years using present cash flow amounts
• Shareholder-oriented activities: Decrease in shares outstanding over both one-year and five-year periods shows dedication to improving shareholder value
• Liquidity situation: Current and quick ratios of 1.77 and 1.11 respectively give enough short-term monetary flexibility

The health rating confirms the screening method of staying away from firms with financial pressure, as good balance sheets and liquidity situations help make sure dividend payments can continue during difficult economic times.

Growth and Valuation Background

While the main focus for dividend investors stays income lastingness, Cummins displays positive growth traits with a rating of 4:

• Earnings increase: EPS grew 14.51% in the last year and is anticipated to rise 13.18% each year in the future
• Speeding growth path: The company's EPS growth rate is forecast to get better compared to past levels
• Revenue steadiness: Even with a small recent drop, revenue has increased at an average yearly rate of 7.67% over recent years

The valuation rating of 3 shows a higher multiple that dividend investors often take for quality firms with dependable income streams, especially when backed by good profitability and dividend traits.

For investors wanting to find similar dividend chances, the Best Dividend Stocks screen gives more companies meeting these conditions. The full fundamental analysis report for Cummins provides more detailed look into the company's monetary position and dividend lastingness measures.

Disclaimer: This article is for informational purposes only and does not constitute investment advice, recommendation, or endorsement of any security. Investors should conduct their own research and consult with a financial advisor before making investment decisions. Past performance does not guarantee future results, and dividend payments are subject to company discretion and market conditions.