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Caterpillar (CAT) is a Top Dividend Stock Right Now: Should You Buy?
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All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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
Headquartered in Deerfield, Caterpillar (CAT - Free Report) is an Industrial Products stock that has seen a price change of 4.62% so far this year. The construction equipment company is currently shelling out a dividend of $1.11 per share, with a dividend yield of 2.05%. This compares to the Manufacturing - Construction and Mining industry's yield of 1.72% and the S&P 500's yield of 1.46%.
Taking a look at the company's dividend growth, its current annualized dividend of $4.44 is up 3.7% from last year. In the past five-year period, Caterpillar has increased its dividend 4 times on a year-over-year basis for an average annual increase of 9.19%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Caterpillar's current payout ratio is 41%. This means it paid out 41% of its trailing 12-month EPS as dividend.
CAT is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $12.32 per share, representing a year-over-year earnings growth rate of 13.97%.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer 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. With that in mind, CAT is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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Caterpillar (CAT) is a Top Dividend Stock Right Now: Should You Buy?
All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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
Headquartered in Deerfield, Caterpillar (CAT - Free Report) is an Industrial Products stock that has seen a price change of 4.62% so far this year. The construction equipment company is currently shelling out a dividend of $1.11 per share, with a dividend yield of 2.05%. This compares to the Manufacturing - Construction and Mining industry's yield of 1.72% and the S&P 500's yield of 1.46%.
Taking a look at the company's dividend growth, its current annualized dividend of $4.44 is up 3.7% from last year. In the past five-year period, Caterpillar has increased its dividend 4 times on a year-over-year basis for an average annual increase of 9.19%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Caterpillar's current payout ratio is 41%. This means it paid out 41% of its trailing 12-month EPS as dividend.
CAT is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $12.32 per share, representing a year-over-year earnings growth rate of 13.97%.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer 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. With that in mind, CAT is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).