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Why Caterpillar (CAT) is a Top Dividend Stock for Your Portfolio
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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. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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 4.08% so far this year. Currently paying a dividend of $1.11 per share, the company has a dividend yield of 2.06%. In comparison, the Manufacturing - Construction and Mining industry's yield is 1.26%, while the S&P 500's yield is 1.63%.
In terms of dividend growth, the company's current annualized dividend of $4.44 is up 3.7% from last year. Over the last 5 years, Caterpillar has increased its dividend 4 times on a year-over-year basis for an average annual increase of 9.19%. Looking ahead, future dividend growth will be dependent on earnings growth and 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.
CAT is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $12.64 per share, representing a year-over-year earnings growth rate of 16.93%.
Bottom Line
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. 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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Why Caterpillar (CAT) is a Top Dividend Stock for Your Portfolio
Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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 4.08% so far this year. Currently paying a dividend of $1.11 per share, the company has a dividend yield of 2.06%. In comparison, the Manufacturing - Construction and Mining industry's yield is 1.26%, while the S&P 500's yield is 1.63%.
In terms of dividend growth, the company's current annualized dividend of $4.44 is up 3.7% from last year. Over the last 5 years, Caterpillar has increased its dividend 4 times on a year-over-year basis for an average annual increase of 9.19%. Looking ahead, future dividend growth will be dependent on earnings growth and 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.
CAT is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $12.64 per share, representing a year-over-year earnings growth rate of 16.93%.
Bottom Line
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. 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).