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Tech stocks have had a rough few weeks on the market as investors look for signs of weakness in the AI-fueled technology boom. This has led investors to seek stability in dividend-paying stocks with established records. Jim Cramer recently highlighted dividend-paying companies that are likely to generate solid returns for investors.
Cramer has said recently that the market can be in the midst of ‘great broadening.’ This means moving away from Magnificent Seven technology stocks and into other parts of the market. It can represent a shift to small-cap and large-cap stocks in sectors that may not get much attention.
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Cummins (NYSE: CMI ) may be one of those little-known opportunities. Cummins Inc. was founded in 1919 to build machines. Since then it has expanded into five business segments: components, engines, distribution, power systems, and Accelera by Cummins. Based in Indiana, it has a global manufacturing and service network and employs more than 75,000 people. It has benefited from the energy transition. Cummins is committed to its Destination Zero strategy, which features products such as advanced diesel, natural gas, electric, and hybrid powertrains and powertrain-related components.
Cummins had a record monthly sales in the second quarter of 2024, with a profit of $8.8 billion. It also increased its 2024 revenue guidance to a 3% decline to flat due to stronger-than-expected demand in some markets. In July, they announced that their next dividend would be increased from $1.68 per share to $1.82 per share, an 8.3% bump. Cummins has increased its dividend for 15 consecutive years. It pays $7.28 in dividends per share and has an annual dividend yield of 2.38%.
Cramer interviewed the CEO of Cummins Jennifer Rumsey in the results, pointing out that Cummins has not only a blowout quarter but a quarter more than many companies sell for. As part of Cummins’s Destination Zero strategy, it is making strides in battery technology and zero-emissions. Rumsey said the company is spending a record amount on research and development to drive this initiative. It also invested $1 billion in a US-based manufacturing plant for the HELM engine platform. HELM stands for higher efficiency, lower emissions, and fuel diversity and is a fuel agnostic platform that can be used for natural gas, diesel and hydrogen engines. These multiple solutions may give Cummins even more flexibility depending on where the customer’s demands lie.
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Cummins stock has risen nearly 83% over the past five years. It has a P/E ratio of 21. Multiple paths to growth may mean that despite its long history, there is still plenty of room for innovation and growth. It also connects to artificial intelligence by providing backup generators for data centers, helping to overcome grid instability.
Rumsey and Cramer also discussed the potential of hydrogen engines. While hydrogen has been slow to take off as an alternative fuel source, Rumsey said that hydrogen is particularly well suited for applications like heavy-duty, weight-sensitive trucks and long-distance travel. He emphasized that the timeline for hydrogen is longer than some of the other projects Cummins is working on.
Cummins faces several challenges ahead, including a slowdown in demand for freight trucks, which will affect sales of some engines, but diversification offers some degree of safety. Cramer said the stock bought back in April. It has a consensus buy rating of 5.04% based on the three most recent analyst ratings. With a solid track record and expansion plans ahead, Cummins has been working on trucks for years.
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This article Jim Cramer Calls This Quarter of Stock Dividends A Blowout, Time To Invest? Originally appeared on Benzinga.com
