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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. But 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 that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the 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
Caterpillar (CAT - Free Report) is headquartered in Deerfield, and is in the Industrial Products sector. The stock has seen a price change of 3.02% since the start of the year. The construction equipment company is currently shelling out a dividend of $1.11 per share, with a dividend yield of 2.08%. This compares to the Manufacturing - Construction and Mining industry's yield of 1.94% and the S&P 500's yield of 1.56%.
Taking a look at the company's dividend growth, its current annualized dividend of $4.44 is up 3.7% from last year. Caterpillar has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 9.19%. 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 41%. This means it paid out 41% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, CAT expects solid earnings growth. The Zacks Consensus Estimate for 2022 is $12.58 per share, with earnings expected to increase 16.37% from the year ago period.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors have to be mindful 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. But 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 that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the 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
Caterpillar (CAT - Free Report) is headquartered in Deerfield, and is in the Industrial Products sector. The stock has seen a price change of 3.02% since the start of the year. The construction equipment company is currently shelling out a dividend of $1.11 per share, with a dividend yield of 2.08%. This compares to the Manufacturing - Construction and Mining industry's yield of 1.94% and the S&P 500's yield of 1.56%.
Taking a look at the company's dividend growth, its current annualized dividend of $4.44 is up 3.7% from last year. Caterpillar has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 9.19%. 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 41%. This means it paid out 41% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, CAT expects solid earnings growth. The Zacks Consensus Estimate for 2022 is $12.58 per share, with earnings expected to increase 16.37% from the year ago period.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors have to be mindful 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).