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Cummins: Boring Is the New Sexy
05/05/2015 8:00 am EST
Most of the TV chatter devoted to stocks swirls around hot trends and new devices—all without the faintest hint of earnings or dividends, let alone potential revenue—observes long-term dividend reinvestment expert David Fish, editor of Direct Investing.
Meanwhile, companies that have been around for decades, if not a century or more, continue to go about their business, doing the dirty work that makes society function, gets us from Point A to Point B, feeds and clothes us, and generally provides the goods and services that we have all come to take for granted.
The latter companies are just plain boring, but they also provide us with reliable and growing earnings and dividends, making our investments in them eternally rewarding.
One such boring firm is our latest featured stock, Cummins (CMI). Founded in 1919, Cummins is a $25 billion firm that manufactures and services diesel and natural gas engines and related components and operates four segments: Engine, Distribution, Components, and Power Generation.
The Engine segment offers diesel and natural gas engines under the Cummins and customer brand names for the heavy- and medium-duty truck, bus, RVs, agricultural, construction, mining, marine, oil and gas, rail, and governmental equipment markets.
The Distribution segment distributes and services parts and filtration products, power generation products, and engines, and offers maintenance and engineering services.
The Components segment offers custom engineering systems and integrated controls, oxidation catalysts, filters, turbochargers, coolant, diesel exhaust fluid, and additives.
The Power Generation segment designs and manufactures components that make up power generation systems, including controls, alternators, transfer switches, and components.
The stock has a price/earnings ratio of 15 and is expected to earn about $10.10 per share this year and $11.21 in 2016, compared with $9.13 in 2014. The annual dividend has gone from 30 cents to $3.12 per share in ten years.
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