Are You Looking For A High-Growth Dividend Stock?

All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Cummins in Focus

Cummins CMI is headquartered in Columbus, and is in the Auto-Tires-Trucks sector. The stock has seen a price change of 3.4% since the start of the year. The engine maker is currently shelling out a dividend of $1.82 per share, with a dividend yield of 2.02%. This compares to the Automotive - Internal Combustion Engines industry's yield of 0.99% and the S&P 500's yield of 1.56%.

Taking a look at the company's dividend growth, its current annualized dividend of $7.28 is up 4% from last year. Over the last 5 years, Cummins has increased its dividend 5 times on a year-over-year basis for an average annual increase of 7.49%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Cummins's current payout ratio is 34%, meaning it paid out 34% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, CMI expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $22.54 per share, representing a year-over-year earnings growth rate of 5.47%.

Bottom Line

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers a quarterly payout.

For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, CMI is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).

Only $1 to See All Zacks' Buys and Sells

We're not kidding.

Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.

Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 256 positions with double- and triple-digit gains in 2024 alone.

See Stocks Now >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

 
Cummins Inc. CMI: Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research