New Purchase CMI

31 May 2015 15:10
Tags cmi cummins

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Picked up some shares of Cummins Inc. (CMI) on Friday 5/29 which increases my annual dividend by $43. I have been watching CMI for sometime as I needed to increase my exposure to industrial but did not have the free cash till just recently. Though CMI only yields 2.2% its their dividend growth rate and low payout ratio are enticing. CMI's low debt to capital and consistent earnings growth make it more attractive than its larger competitor Caterpillar (CAT).

CMI's 5 year average dividend growth rate has been 32% but it most recent earning growth was only 16% so it is unrealistic to assume the dividend growth rate can maintain such a high rate. Realistically going forward an anticipated 9% dividend growth rate is achievable while keeping their payout ratio less the 40% (currently at 33%).

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