Recent Investment

Despite the recent market volatility there are some really very good companies out there with a good dividend yield and very good fundamental data. Furthermore I am currently looking on companies which are undervalued right now and which do have some upside potential. One of them is the stock of the company Cummins, a manufacturer of diesel and gas engines. By this purchase I increased my share of the industrial segments.

Overview

Cummins Engine (CMI) manufactures, distributes, and services diesel and natural gas engines, electric power generation systems, and engine-related component products worldwide.
Headquartered in Columbus, Indiana, United States, Cummins sells in approximately 190 countries and territories through a network of more than 600 company-owned and independent distributors and approximately 6,000 dealers. The company operates through four segments: Engine, Power Generation, Components, and Distribution.




 

Key Data

 CMI

Source: Morningstar.com

 As you can see the stock has had a major decline in the last year and is close to its 5 year low. This makes it a price earning ratio of currently 9.2 compared to the 5 year average of 14.4.

The current dividend yield is at 4.51% with a current dividend of 3.90$. The last dividend increase was at 11.1%, the years before it was at 25%.

The last year earnings per share was at 9.04 USD, which makes it a payout ratio of 43.8%. Another important fact is the free cash flow per share which was in the year 2014 at 7.68 USD. This just means that dividend will be safe for the next years.

But the most impressive fact is that long term debt is just at 1,589 billion USD and at the same with cash of 2,394 billion USD.

Conclusion

Although the industrial sector will face some headwinds, and the revenue growth will not be so high in the next year, the company offers a very good and through the impressive financials a very safe dividend. Considering the free cash flow and the moderate pay out ratio there will be enough dividend growth potential.

So all in all I bought 15 shares which will add 58.5 USD to my annual dividend income.

What do you think about this purchase? Please feel free to give your comments about it.

Disclosure: I do not recommend any decision to the reader or any user, please consult your own research. Thank you for your understanding.

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