Understanding the Dividend Performance and Sustainability of Caterpillar Inc (CAT, Financial)
Caterpillar Inc(CAT) recently announced a dividend of $1.3 per share, payable on 2023-11-20, with the ex-dividend date set for 2023-10-20. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's delve into Caterpillar Inc's dividend performance and assess its sustainability.
What Does Caterpillar Inc Do?
Caterpillar is the world's leading manufacturer of heavy equipment, power solutions, and locomotives. It is currently the world's largest manufacturer of heavy equipment with over 13% market share in 2021. The company operates through four reportable segments: construction industries, resource industries, energy and transportation, and Caterpillar Financial Services. Its products are available globally through a dealer network that consists of about 2,700 branches maintained by 160 dealers. Caterpillar Financial Services provides retail financing for machinery and engines to its customers, in addition to wholesale financing for dealers, which increases the likelihood of Caterpillar product sales.
A Glimpse at Caterpillar Inc's Dividend History
Caterpillar Inc has maintained a consistent dividend payment record since 1986, distributed on a quarterly basis. Caterpillar Inc has increased its dividend each year since 1992, earning its place as a dividend aristocrat, a title bestowed upon companies that have consistently increased their dividend for at least the past 31 years.
Breaking Down Caterpillar Inc's Dividend Yield and Growth
As of today, Caterpillar Inc boasts a 12-month trailing dividend yield of 1.87% and a 12-month forward dividend yield of 2.00%, indicating an anticipated increase in dividend payments over the next 12 months.
Over the past three years, Caterpillar Inc's annual dividend growth rate was 6.90%. This rate increased to 8.60% per year over a five-year period. Over the past decade, Caterpillar Inc's annual dividends per share growth rate stands at 8.40%. Based on Caterpillar Inc's dividend yield and five-year growth rate, the 5-year yield on cost of Caterpillar Inc stock as of today is approximately 2.82%.
The Sustainability Question: Payout Ratio and Profitability
To evaluate the sustainability of the dividend, one must consider the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-06-30, Caterpillar Inc's dividend payout ratio is 0.30.
Caterpillar Inc's profitability rank, at 7 out of 10 as of 2023-06-30, suggests good profitability prospects. The company has reported net profit in 9 years out of the past 10 years.
Growth Metrics: The Future Outlook
Caterpillar Inc's growth rank of 7 out of 10 suggests a healthy growth trajectory relative to its competitors. Caterpillar Inc's revenue has increased by approximately 5.70% per year on average, a rate that underperforms approximately 50% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Caterpillar Inc's earnings increased by approximately 5.60% per year on average, a rate that underperforms approximately 61.25% of global competitors.
The company's 5-year EBITDA growth rate is 38.00%, which underperforms approximately 12.39% of global competitors.
Next Steps
In conclusion, Caterpillar Inc's consistent dividend payments, growth rate, and relatively low payout ratio, combined with its profitability and growth metrics, paint an optimistic picture for its dividend sustainability. However, investors should keep an eye on its growth metrics, as they underperform a significant percentage of global competitors. GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
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