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Caterpillar (CAT) Hikes Quarterly Dividend Payout by 8%
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Caterpillar’s (CAT - Free Report) board of directors approved an 8% hike in the quarterly dividend to boost shareholder value. The latest hike takes the company’s quarterly payout to $1.30 per share from the prior payout of $1.20 per share.
The increased dividend will be paid on Aug 18, 2023, to shareholders of record as on Jul 20, 2023. Based on the stock’s Jun 14 closing price of $243.32, the new dividend will translate to a 2.14% yield, which is higher than the industry’s yield of 1.94 and the S&P 500’s 1.45.
The company’s previous dividend hike of 8% was announced in June last year. CAT continues to maintain its status as a dividend aristocrat, having continued its streak of paying higher dividends to its shareholders for 29 straight years. Caterpillar has paid a cash dividend every year since its inception and paid a quarterly dividend since 1933.
The consistent dividend hikes reflect CAT’s strong balance sheet and liquidity position. The company generated an operating cash flow of $1.4 billion in the first quarter of 2023 and ended the quarter with cash and short-term investments of $6.8 billion. Machinery, Energy & Transportation (ME&T) debt was $9.6 billion. Compared to the base of 4.5 in 2017, the company’s times interest earned ratio has improved substantially over the years and is currently 9.2.
Caterpillar returned $1 billion to shareholders in the first quarter of 2023, which included about $600 million in dividends and $400 million in share repurchases. The company currently has a five-year dividend growth rate of 8.2% and a payout ratio of 30.2%, higher than its industry peers. Over the past four years, the company has returned an average of 99% of its ME&T free cash flow to shareholders despite a setback from COVID-induced weak demand and inflationary pressures and supply-chain snarls. The company intends to return all of its ME&T free cash flow to shareholders as dividends and share repurchases over time.
Also, return on equity — a profitability measure of how prudently the company is utilizing its shareholders’ funds — is 45.6%, higher than the industry’s average of 25.7%.
Caterpillar has seen year-over-year growth in revenues and earnings for nine straight quarters despite supply-chain issues and inflationary pressure plaguing the industry. The backlog at the end of the first quarter of 2023 was $30.4 billion, which was up by $3.9 billion from the last year’s quarter. Caterpillar expects growth in its topline in 2023 supported by price and higher sales to users, with healthy underlying end markets.
It anticipates full-year adjusted operating margins to be in the top half of its target range. Previously, at the fourth-quarter 2022 conference call, the company had updated the sale range for 2023 from $39-$66 billion to $42-$72 billion. At the lowest level of its sales guidance ($42 billion), the company had anticipate operating margin in the range of 10% to 13%. At the midpoint ($57 billion), the operating margin is expected to range between 14% and 17%. If sales are near the top-end of its guidance ($72 billion), the operating margin is projected to be between 18% and 21%.
The company’s Construction Industries segment is expected to benefit from the rising construction activities in the United States and other parts of the world. Growth in the Resource Industries segment will be aided by demand for commodities fueled by the energy-transition trend. This poises the company well for improved results in the forthcoming quarters.
Price Performance
Over the past year, Caterpillar stock has gained 25.2%, compared with the industry’s 26% growth.
Image Source: Zacks Investment Research
Zacks Rank & Stocks to Consider
Caterpillar currently sports a Zacks Rank #1 (Strong Buy).
Hubbell has an average trailing four-quarter earnings surprise of 21%. The Zacks Consensus Estimate for HUBB’s fiscal 2023 earnings is pegged at $13.81 per share. The consensus estimate for 2023 earnings has moved 22.5% north in the past 60 days. Its shares have gained 66.9% in the last year.
Manitowoc has an average trailing four-quarter earnings surprise of 38.8%. The Zacks Consensus Estimate for MTW’s 2023 earnings is pegged at 85 cents per share. The consensus estimate for 2023 earnings has moved 63.5% north in the past 60 days. MTW’s shares have gained 49.2% in the last year.
The Zacks Consensus Estimate for AptarGroup’s 2023 earnings per share is pegged at $4.15, up 7.5% in the past 60 days. It has a trailing four-quarter average earnings surprise of 6.4%. ATR has gained 12.6% in the last year.
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Caterpillar (CAT) Hikes Quarterly Dividend Payout by 8%
Caterpillar’s (CAT - Free Report) board of directors approved an 8% hike in the quarterly dividend to boost shareholder value. The latest hike takes the company’s quarterly payout to $1.30 per share from the prior payout of $1.20 per share.
The increased dividend will be paid on Aug 18, 2023, to shareholders of record as on Jul 20, 2023. Based on the stock’s Jun 14 closing price of $243.32, the new dividend will translate to a 2.14% yield, which is higher than the industry’s yield of 1.94 and the S&P 500’s 1.45.
The company’s previous dividend hike of 8% was announced in June last year. CAT continues to maintain its status as a dividend aristocrat, having continued its streak of paying higher dividends to its shareholders for 29 straight years. Caterpillar has paid a cash dividend every year since its inception and paid a quarterly dividend since 1933.
The consistent dividend hikes reflect CAT’s strong balance sheet and liquidity position. The company generated an operating cash flow of $1.4 billion in the first quarter of 2023 and ended the quarter with cash and short-term investments of $6.8 billion. Machinery, Energy & Transportation (ME&T) debt was $9.6 billion. Compared to the base of 4.5 in 2017, the company’s times interest earned ratio has improved substantially over the years and is currently 9.2.
Caterpillar returned $1 billion to shareholders in the first quarter of 2023, which included about $600 million in dividends and $400 million in share repurchases. The company currently has a five-year dividend growth rate of 8.2% and a payout ratio of 30.2%, higher than its industry peers. Over the past four years, the company has returned an average of 99% of its ME&T free cash flow to shareholders despite a setback from COVID-induced weak demand and inflationary pressures and supply-chain snarls. The company intends to return all of its ME&T free cash flow to shareholders as dividends and share repurchases over time.
Also, return on equity — a profitability measure of how prudently the company is utilizing its shareholders’ funds — is 45.6%, higher than the industry’s average of 25.7%.
Caterpillar has seen year-over-year growth in revenues and earnings for nine straight quarters despite supply-chain issues and inflationary pressure plaguing the industry. The backlog at the end of the first quarter of 2023 was $30.4 billion, which was up by $3.9 billion from the last year’s quarter. Caterpillar expects growth in its topline in 2023 supported by price and higher sales to users, with healthy underlying end markets.
It anticipates full-year adjusted operating margins to be in the top half of its target range. Previously, at the fourth-quarter 2022 conference call, the company had updated the sale range for 2023 from $39-$66 billion to $42-$72 billion. At the lowest level of its sales guidance ($42 billion), the company had anticipate operating margin in the range of 10% to 13%. At the midpoint ($57 billion), the operating margin is expected to range between 14% and 17%. If sales are near the top-end of its guidance ($72 billion), the operating margin is projected to be between 18% and 21%.
The company’s Construction Industries segment is expected to benefit from the rising construction activities in the United States and other parts of the world. Growth in the Resource Industries segment will be aided by demand for commodities fueled by the energy-transition trend. This poises the company well for improved results in the forthcoming quarters.
Price Performance
Over the past year, Caterpillar stock has gained 25.2%, compared with the industry’s 26% growth.
Image Source: Zacks Investment Research
Zacks Rank & Stocks to Consider
Caterpillar currently sports a Zacks Rank #1 (Strong Buy).
Some other top-ranked stocks from the Industrial Products sector are Hubbell Incorporated (HUBB - Free Report) , The Manitowoc Company, Inc. (MTW - Free Report) and AptarGroup, Inc. (ATR - Free Report) . HUBB and MTW sport a Zacks Rank #1 at present, and ATR carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Hubbell has an average trailing four-quarter earnings surprise of 21%. The Zacks Consensus Estimate for HUBB’s fiscal 2023 earnings is pegged at $13.81 per share. The consensus estimate for 2023 earnings has moved 22.5% north in the past 60 days. Its shares have gained 66.9% in the last year.
Manitowoc has an average trailing four-quarter earnings surprise of 38.8%. The Zacks Consensus Estimate for MTW’s 2023 earnings is pegged at 85 cents per share. The consensus estimate for 2023 earnings has moved 63.5% north in the past 60 days. MTW’s shares have gained 49.2% in the last year.
The Zacks Consensus Estimate for AptarGroup’s 2023 earnings per share is pegged at $4.15, up 7.5% in the past 60 days. It has a trailing four-quarter average earnings surprise of 6.4%. ATR has gained 12.6% in the last year.