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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. 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 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 Irving, and is in the Industrial Products sector. The stock has seen a price change of -7.47% since the start of the year. The construction equipment company is paying out a dividend of $1.2 per share at the moment, with a dividend yield of 2.17% compared to the Manufacturing - Construction and Mining industry's yield of 1.39% and the S&P 500's yield of 1.72%.
Taking a look at the company's dividend growth, its current annualized dividend of $4.80 is up 3.9% 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 8.19%. 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 35%. This means it paid out 35% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for CAT for this fiscal year. The Zacks Consensus Estimate for 2023 is $15.70 per share, which represents a year-over-year growth rate of 13.44%.
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 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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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. 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 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 Irving, and is in the Industrial Products sector. The stock has seen a price change of -7.47% since the start of the year. The construction equipment company is paying out a dividend of $1.2 per share at the moment, with a dividend yield of 2.17% compared to the Manufacturing - Construction and Mining industry's yield of 1.39% and the S&P 500's yield of 1.72%.
Taking a look at the company's dividend growth, its current annualized dividend of $4.80 is up 3.9% 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 8.19%. 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 35%. This means it paid out 35% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for CAT for this fiscal year. The Zacks Consensus Estimate for 2023 is $15.70 per share, which represents a year-over-year growth rate of 13.44%.
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 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).