Monday, February 29, 2016

Recent Buy: Cummins Inc

17 Feb 2016: Bought 25 shares of CMI at $100.07 per share.

Founded in 1919 and headquartered in Columbus, Indiana, CMI (NYSE:CMIis one of the leading designers and manufacturers of diesel engines. The company also produces natural gas engines and engine components and subsystems. CMI sells its products to original equipment manufacturers, distributors, and other customers worldwide. 

CMI is ranked 2nd in the January 2016 edition of my 10 Dividend Growth Stocks article series. The company has a 10-year streak of consecutive dividend increases and pays quarterly dividends of 97.5¢ per share in the months of March, June, September and December.

I already own 19 shares of CMI, which I bought in April 2015 at $134.62 per share and at an initial yield on cost (YoC) of 2.32%.

With this buy I'm adding 25 shares at $100.07 per share, for an initial YoC of 3.90%. In the process, I'm adding $97.50 in expected dividend income to DivGro's projected annual dividend income, which currently stands at $8,512.11.

CMI's share price has declined about 39% since recording an all time high in June 2014, affording me an opportunity to reduce my overall cost basis. The average cost basis for the 44 shares I now own is $114.99.

The following chart shows CMI's recent price history along with my buy prices.

Source: Scottrade

What makes CMI attractive for me is the 5-yr growth rate of 32%! Here are some additional statistics of CMI:

Cummins Inc. (NYSE:CMI
  streak 10 yrs | 5-yr growth rate 32.0% | yield 3.99%@ $97.66
  payout 42% | debt 21% | moat narrow | credit rating A+

The following chart shows CMI's dividend payments and EPS over the last 10 years. Earnings growth is solid and it is evident that the company's growing dividend is sufficiently covered:

Updated ratings for CMI

 MorningStar Rating (****-)
 S&P Capital IQ's Stock Report (****-) Buy 
 The Motley Fool's CAPS Rating  (*****)
 Thomson Reuters StockReport+ (4/10) Neutral

25 shares of CMI adds $97.50 to DivGro's projected annual dividend income. I've updated my portfolio to reflect this purchase.

What do you think of CMI? Do you own shares? Please respond in the comment section below.


  1. Nice purchase FerdiS,

    The numbers are looking great as well. Low payout, high yield, low debt and an amazing growth. What's not to like about these numbers, right?

    Seems like great value.. wish I had enough capital to initiate a position of this size.

    Keep the tree growing!
    Best wishes, DfS

    1. Thanks, DfS -- CMI's downtrend the last year has been trying my patience, but the company's fundamentals just look solid. The last 2 months the share price seems to have been basing, so I decided to add shares. We'll see how it goes. I really do like CMI's growth prospects.

      Thanks for commenting and best of luck with your investments!

  2. Nice buy!

    I bought CMI at $104, and the stock went all the way to $80s. I had a chance to average down, but something else on my portfolio dipped further, so I chose to buy the different stock instead. However, looking at the current price, it's a miss-opportunity on my part.

    1. Thanks Vivianne! Sometimes, there are too many opportunities and too few dollars to spend... I can certainly sympathize with your situation. Looking at the bright side, you're almost back at your cost basis, so almost no paper losses anymore!

      Take care and thanks for visiting!

  3. Nice job averaging down. I really like CMI but the market has not the past 9-months. Ive bought twice now to reduce my basis as well.

    1. Thanks for visiting and commenting... yes, it is great to be able to average down. Congratulations on reducing your cost basis (twice!) -- I think CMI is a solid stock and I'm hoping for great things ahead.



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