June 23, 2025 a 03:31 pm
CMI: Dividend Analysis - Cummins Inc.
Cummins Inc. is a company boasting a robust dividend history, reflecting a stable and mature financial position within the industrial sector. With a commendable dividend yield and impressive historical growth despite market challenges, Cummins remains a steady choice for dividend investors. Its financial metrics point towards prudent capital management and stakeholder-friendly policies.
📊 Overview
Examining Cummins Inc.'s dividend profile highlights significant strengths. The company operates in the robust Industrial sector, offering a modest dividend yield alongside a consistent increase in dividends over four decades.
| Sector | Dividend Yield | Current Dividend per Share | Dividend History | Last Cut or Suspension |
|---|---|---|---|---|
| Industrial | 2.29% | 7.01 USD | 42 years | None |
📈 Dividend History
Cummins Inc. has consistently increased its dividend, reflecting a robust and reliable business model. This history is vital in assessing long-term financial health and confidence in ongoing profitability.
| Year | Dividend Per Share (USD) |
|---|---|
| 2025 | 3.64 |
| 2024 | 7.00 |
| 2023 | 6.50 |
| 2022 | 6.04 |
| 2021 | 5.60 |
🌱 Dividend Growth
The dividend growth rates over the past years underscore Cummins Inc.'s commitment to returning value to shareholders. Steady growth in dividends is a hallmark of financial health and strategic success.
| Time | Growth |
|---|---|
| 3 years | 7.72% |
| 5 years | 7.39% |
The average dividend growth is 7.39% over 5 years. This shows moderate but steady dividend growth.
✅ Payout Ratio
Payout ratios are critical in gauging how sustainable dividend distributions are. Cummins' EPS-based payout ratio indicates judicious financial management.
| Key Figure | Ratio |
|---|---|
| EPS-based | 34.74% |
| Free Cash Flow-based | 13798.28% |
The EPS-based payout ratio of 34.74% denotes a conservative dividend approach, ensuring sustainability. However, the FCF-based figure suggests caution in current cash flow utilization strategies.
📉 Cashflow & Capital Efficiency
Effective cash flow management and capital efficiency are crucial for sustaining dividend payouts and ensuring overall financial stability.
| Metric | 2024 | 2023 | 2022 |
|---|---|---|---|
| Free Cash Flow Yield | 0.58% | 8.11% | 3.05% |
| Earnings Yield | 8.19% | 2.17% | 6.27% |
| CAPEX to Operating Cash Flow | 81.24% | 30.58% | 46.69% |
| Stock-based Compensation to Revenue | 0% | 0% | 0.12% |
| Free Cash Flow to Operating Cash Flow Ratio | 18.76% | 69.42% | 53.31% |
While the free cash flow yield shows variability, efficient capital allocation reflects positively on Cummins' ability to maintain dividend distributions.
🗣️ Balance Sheet & Leverage Analysis
A solid balance sheet and prudent leverage management are pillars of financial viability. These metrics highlight Cummins' sound financial practices.
| Metric | 2024 | 2023 | 2022 |
|---|---|---|---|
| Debt-to-Equity | 0.74 | 0.81 | 0.88 |
| Debt-to-Assets | 0.24 | 0.23 | 0.26 |
| Debt-to-Capital | 0.43 | 0.45 | 0.47 |
| Net Debt to EBITDA | 0.93 | 1.66 | 1.51 |
| Current Ratio | 1.34 | 1.18 | 1.27 |
| Quick Ratio | 0.80 | 0.74 | 0.77 |
| Financial Leverage | 3.07 | 3.62 | 3.38 |
Overall, Cummins Inc. maintains a stable leverage structure, optimizing debt while ensuring liquidity and operational efficiency.
🏢 Fundamental Strength & Profitability
Key profitability ratios and operational metrics offer insight into the financial robustness of Cummins Inc. and its capability to reward shareholders.
| Metric | 2024 | 2023 | 2022 |
|---|---|---|---|
| Return on Equity | 38.42% | 8.31% | 23.97% |
| Return on Assets | 12.51% | 2.30% | 7.10% |
| Return on Invested Capital | 13.70% | 4.30% | 7.73% |
| Net Margin | 11.57% | 2.16% | 7.66% |
| EBIT Margin | 15.46% | 5.87% | 10.75% |
| EBITDA Margin | 18.59% | 8.88% | 13.54% |
| Gross Margin | 24.74% | 24.22% | 23.93% |
| Research & Development to Revenue | 4.29% | 4.40% | 4.55% |
Cummins showcases a strong return on equity, supporting its competitive industry position, while maintaining respectable profitability margins.
📈 Price Development
🔍 Dividend Scoring System
An analysis of Cummins Inc. using a custom dividend scoring system evaluates key factors influencing dividend attractiveness.
| Criterion | Score | Score Bar |
|---|---|---|
| Dividend Yield | 3 | |
| Dividend Stability | 5 | |
| Dividend Growth | 4 | |
| Payout Ratio | 2 | |
| Financial Stability | 4 | |
| Dividend Continuity | 5 | |
| Cashflow Coverage | 3 | |
| Balance Sheet Quality | 4 |
Total Score: 30/40
📋 Rating
Overall, Cummins Inc. presents a compelling case for dividend-focused investors, with its long-standing dividend history, reasonable yield, and steady growth. The company maintains financial prudence, balancing growth and shareholder returns effectively, making it a reliable choice in the industrial sector.