Cummins Inc. (CMI) announced a 25% increase in its quarterly dividend to 62.50 cents per share from 50 cents. The company will pay the cash dividend on Sep 3, 2013 to shareholders of record as on Aug 22, 2013. Following the announcement, shares of Cummins increased 1.62% to close at $112.62 on Jul 9.
Last year in July, Cummins had increased its quarterly dividend by 25% to 50 cents per share from 40 cents, which was paid on Sep 1, 2012. With this hike, the company has now increased its dividend by 257% over the last four years.
In Dec 2012, Cummins also announced the share repurchase program of up to $1 billion. The company expects that these shareholder-friendly moves will enhance the company’s shareholders value.
Cummins is a leading worldwide designer, manufacturer and distributor of diesel and natural gas engines, electric power generation systems, and engine-related components, fuel systems, controls and air handling systems. Currently, the company retains a Zacks Rank #4 (Sell).
Cummins posted a sharp 39.5% fall in earnings to $1.44 per share in the first quarter of 2013 from $2.38 in the same quarter of 2012 (all excluding special items), missing the Zacks Consensus Estimate of $1.86. Lower earnings were attributable to weaker demand in the company’s most geographies and end markets. Revenues in the quarter dipped 12% to $3.9 billion, which was marginally lower than the Zacks Consensus Estimate of $4.0 billion.
We expect that Cummins will benefit from new emission standards, fuel economy improvement and favorable trends for its Power Generation business. In addition, the company invested heavily in capacity expansion and the introduction of new products in the engine division will have favorable impact in the long run.
Other stocks that are performing well in the industry include Visteon Corp. (VC), Power Solutions International, Inc. (PSIX) and Weichai Power Co. Ltd (WEICY). Visteon carry a Zacks Rank #1 (Strong Buy), while Power Solutions and Weichai Power are Zacks Rank #2 (Buy) stocks.
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