Delving Into Caterpillar Inc's Dividend Details
Caterpillar Inc (CAT, Financial) recently announced a dividend of $1.3 per share, payable on 2024-02-20, with the ex-dividend date set for 2024-01-19. 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 look into Caterpillar Inc's dividend performance and assess its sustainability.
What Does Caterpillar Inc Do?
Caterpillar is the premier 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 is divided into four reportable segments: construction industries, resource industries, energy and transportation, and Caterpillar Financial Services. Its products are available through a dealer network that covers the globe with 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. Dividends are currently distributed on a quarterly basis. Caterpillar Inc has increased its dividend each year since 1992. The stock is thus listed as a dividend aristocrat, an honor that is given to companies that have increased their dividend each year for at least the past 32 years. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Caterpillar Inc's Dividend Yield and Growth
As of today, Caterpillar Inc currently has a 12-month trailing dividend yield of 1.77% and a 12-month forward dividend yield of 1.85%. This suggests an expectation of increased dividend payments over the next 12 months.
Over the past three years, Caterpillar Inc's annual dividend growth rate was 6.90%. Extended to a five-year horizon, this rate increased to 8.60% per year. And 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 2.67%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate 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 2023-09-30, Caterpillar Inc's dividend payout ratio is 0.28.
Caterpillar Inc's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Caterpillar Inc's profitability 7 out of 10 as of 2023-09-30, suggesting good profitability prospects. The company has reported net profit in 9 years out of past 10 years.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Caterpillar Inc's growth rank of 7 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and Caterpillar Inc's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Caterpillar Inc's revenue has increased by approximately 5.70% per year on average, a rate that underperforms approximately 50.99% 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 6.70% per year on average, a rate that underperforms approximately 56.29% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of 8.40%, which underperforms approximately 45.69% of global competitors.
Concluding Insights on Caterpillar Inc's Dividend Fortitude
In conclusion, Caterpillar Inc's consistent dividend payments, robust growth in dividend rates, prudent payout ratio, and solid profitability metrics paint a positive picture for investors seeking stable income streams. While some growth metrics suggest room for improvement, the company's strong market position and financial health indicate that its dividends are well-grounded. As value investors consider the attractiveness of Caterpillar Inc's dividend profile, they should also weigh these factors against broader market conditions and their individual investment strategies. Will Caterpillar Inc continue to excavate greater value for its shareholders through dividends? Only time will tell, but the company's track record offers a promising sign.
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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.
