The three major stock market indexes closed at record highs last week, led by a string of solid earnings reports. However, market volatility still lingers, with several parts of the world witnessing a resurgence of COVID-19 cases due to the rapid spread of the virus’ Delta variant. Moreover, a decline in consumer sentiment, rising inflation, and a recent surprise increase in jobless claims could sustain stock market volatility in the near term.
So, we think it could be wise to turn to dividend-yielding stocks to ensure a steady stream of income in the current environment. .
Cummins Inc. (CMI), Stanley Black & Decker, Inc. (SWK), and Ally Financial Inc. (ALLY) look attractive at first blush due to their market dominance in their respective industries and stable dividend pay-outs over the years. Furthermore, they each increased their quarterly dividend last week.
Cummins Inc. (CMI)
CMI designs, manufactures, distributes, and servicing diesel and natural gas engines, electric and hybrid powertrains, and related components worldwide. The Columbus, Ind. company operates through five segments: Engine, Distribution, Components, Power Systems, and New Power, and sells its products to original equipment manufacturers (OEMs), distributors, dealers, and other customers.
CMI announced the availability of the Murphy Engine Integrated Control System (EICS) for GTA855GCE and G855GCE gas compression engines on June 1, 202. These engines provide significant operational improvements and power upgrades. As a result, CMI could witness increasing demand for its solution in the coming months.
CMI’s dividend pay-outs have grown at a 6.6% CAGR over the past five years and 7.5% over the past three years. While its four-year average dividend yield is 2.6%, its current dividend translates to a 2.4% yield. It announced a $1.45 quarterly dividend on July 13, 2021, payable on September 2. The latest dividend amount represents a 7.4% rise from the previous quarterly dividend of $1.35.
CMI’s total revenues increased 22% year-over-year to $6.10 billion for its fiscal first quarter ended March 31, 2021. Its EBITDA grew 15.8% year-over-year to $980 million. Its net income increased 18% year-over-year to $603 million. Also, its adjusted EPS came in at $4.07, up 19.3% year-over-year.
The company’s EPS is expected to be $4.03 for the about-to-be-reported quarter ended June 30, 2021, representing a 106.7% year-over-year rise. It surpassed the Street’s EPS estimates in each of the trailing four quarters. CMI’s annual revenue is expected to increase 21.9% year-over-year to $24.15 billion in its fiscal year 2021. The stock’s price has surged 25% over the past year to close Friday’s trading session at $237.44.
It’s no surprise that CMI has an overall B rating, which equates to Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting. The stock has a B grade for Sentiment and Quality.
Click here to see CMI’s ratings for Growth, Value, Momentum, and Stability as well. CMI is ranked #10 of 84 stocks in the A-rated Industrial - Machinery industry.
Click here to check out our Industrial Sector Report for 2021
Stanley Black & Decker, Inc. (SWK)
SWK engages in the tools and storage, industrial, and security businesses worldwide. Its Tools & Storage segment offers power tools and equipment, including professional products, while its industrial segment provides engineered fastening systems and products to customers. Its Security segment designs, supplies, and installs commercial electronic security systems and provides electronic security services. SWK is based in New Britain, Conn.
On April 28, SWK’s CEO, James M. Loree, said, “Our option to acquire the remaining stake in MTD in July has the potential to create an exciting multi-year runway for growth and significant EPS and cash flow accretion.”
The company declared a $0.79 quarterly dividend per share on July 21, 2021, representing a 12.9% increase from the $0.70 previous quarterly dividend. The new dividend is payable on September 21. SWK’s dividend pay-outs have grown at a 4.9% CAGR over the past five years and 3.6% over the past three years. While its four-year average dividend yield is 1.8%, its current dividend translates to a 1.5% yield.
SWK’s net sales increased 34.1% year-over-year to $4.20 billion for the fiscal first quarter ended April 3, 2021. Its operating income grew 159.1% year-over-year to $711.4 million, while its net earnings increased 265.7% year-over-year to $486.8 million. Also, its EPS came in at $2.98, up 238.6% year-over-year.
For its fiscal year 2021, analysts expect SWK’s EPS and revenue to increase 23.8% and 14.4%, respectively, year-over-year to $11.19 and $16.63 billion. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained more than 34% to close Friday’s trading session at $204.19.
SWK’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. In addition, it has an A grade for Growth, and a B grade for Value and Sentiment.
In addition to the POWR Ratings grades we’ve just highlighted, we’ve also rated SWK for Momentum, Stability, and Quality. Click here to see all the SWK ratings. SWK is ranked #8 of 63 stocks in the A-rated Home Improvement & Goods industry.
Ally Financial Inc. (ALLY)
Detroit’s ALLY is a bank holding company providing various digital financial products and services to consumer, commercial, and corporate customers, primarily in the United States and Canada. The company operates through four segments: Automotive Finance, Insurance, Mortgage Finance, and Corporate Finance.
On July 13, 2021, the company announced that its board of directors had authorized a repurchase of up to $2 billion of its common stock for 2021. Jeffrey J. Brown, ALLY’s CEO, said, "The strength of our businesses and resiliency of our balance sheet, including our robust capital position, support our ability to meaningfully increase our common dividend and share repurchase program."
ALLY’s four-year average dividend yield is 2.2%, and its current dividend translates to a 1.9% yield. Its dividend pay-outs have grown at a 15% CAGR over the past three years. It announced a $0.25 quarterly dividend on July 13, 2021, payable on August 16. The new dividend amount represents a 31.6% rise from the previous $0.19 quarterly dividend.
The company’s adjusted net revenue surged 40% year-over-year to $2.14 billion for the fiscal second quarter, ended June 30, 2021. ALLY’s pre-tax income grew 209.2% year-over-year to $1.04 billion. Its core net income increased 281% year-over-year to $868 million. Its adjusted EPS for the quarter came in at $2.33, up 284% year-over-year.
Analysts expect ALLY’s EPS to come in at $6.43 in its fiscal year 2021, representing a 112.2% year-over-year increase. It surpassed the consensus EPS estimates in each of the trailing four quarters. In addition, the company’s revenue is expected to increase 13% year-over-year to $1.90 billion for the quarter ending September 30, 2021. ALLY has gained 142.1% over the past year to close Friday’s trading session at $51.79.
ALLY’s POWR Ratings reflect solid prospects. The company has an overall B rating, which translates to Buy in our proprietary ratings system. In addition, it has a B grade for Growth, Sentiment, and Momentum.
Click here to see the additional POWR Ratings for ALLY (Value, Quality, and Stability). ALLY is ranked #13 of 51 stocks in the B-rated Consumer Financial Services industry.
CMI shares were trading at $237.54 per share on Monday morning, up $0.10 (+0.04%). Year-to-date, CMI has gained 5.73%, versus a 18.62% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
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