Cummins: I’ll Have a Side Order of Buy Backs With That Dividend Hike, Please

How do you turn a frown upside down? If you’re Cummins (CMI), you announce a dividend hike and a $1 billion share buyback.

At around 2:30, Cummins said that it would increase its dividend to 78 cents from 62.5 cents, a jump of nearly 25%, while also announcing that it would buy back an additional $1 billion in shares after the completion of its current $1 billion repurchase plan.

At the time of the announcement today, Cummins shares were down 0.6% at $155.11. Since then, they’ve gained 1.1% and are now up 0.5% at 156.83 at 2:58 p.m.

And since a picture is worth a thousand words:

 

UPDATE: Citigroup’s Timothy Thein and team offer their take:

We believe this move demonstrates Cummins’ superior cash generation capability and confidence in its business model. We continue to see solid risk-adjusted upside in Buy-rated Cummins, as we think its diverse and attractive growth profile will continue to support above average EPS growth, all of which argue for a higher normalized valuation in our opinion.

Shares of Cummins closed little changed at $155.96.