Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Caterpillar in Focus
Based in Deerfield, Caterpillar (CAT - Free Report) is in the Industrial Products sector, and so far this year, shares have seen a price change of 11.57%. Currently paying a dividend of $1.03 per share, the company has a dividend yield of 2.19%. In comparison, the Manufacturing - Construction and Mining industry's yield is 0.93%, while the S&P 500's yield is 1.38%.
In terms of dividend growth, the company's current annualized dividend of $4.44 is up 7.8% from last year. Over the last 5 years, Caterpillar has increased its dividend 3 times on a year-over-year basis for an average annual increase of 8.63%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Caterpillar's current payout ratio is 56%, meaning it paid out 56% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for CAT for this fiscal year. The Zacks Consensus Estimate for 2021 is $9.65 per share, representing a year-over-year earnings growth rate of 47.10%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that CAT is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Caterpillar in Focus
Based in Deerfield, Caterpillar (CAT - Free Report) is in the Industrial Products sector, and so far this year, shares have seen a price change of 11.57%. Currently paying a dividend of $1.03 per share, the company has a dividend yield of 2.19%. In comparison, the Manufacturing - Construction and Mining industry's yield is 0.93%, while the S&P 500's yield is 1.38%.
In terms of dividend growth, the company's current annualized dividend of $4.44 is up 7.8% from last year. Over the last 5 years, Caterpillar has increased its dividend 3 times on a year-over-year basis for an average annual increase of 8.63%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Caterpillar's current payout ratio is 56%, meaning it paid out 56% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for CAT for this fiscal year. The Zacks Consensus Estimate for 2021 is $9.65 per share, representing a year-over-year earnings growth rate of 47.10%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that CAT is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
Free Report – The Bitcoin Profit Phenomenon
Zacks Investment Research has released a Special Report to help you pursue massive profits from the world’s first and largest decentralized form of money.
No guarantees for the future, but in the past three presidential election years, Bitcoin’s returns were as follows: 2012 +272.4%, 2016 +161.1%, and 2020 +302.8%.
Zacks predicts another significant surge. Click below for Bitcoin: A Tumultuous Yet Resilient History.
Download Now – Today It’s FREE >>
Get the latest research report on CAT - FREE