Yahoo Finance Caterpillar (CAT) Could Be a Great Choice
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Caterpillar in Focus
Caterpillar (CAT) is headquartered in Irving, and is in the Industrial Products sector. The stock has seen a price change of -12.73% 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 2.3% compared to the Manufacturing - Construction and Mining industry's yield of 1.3% and the S&P 500's yield of 1.81%.
Taking a look at the company's dividend growth, its current annualized dividend of $4.80 is up 3.9% 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 8.19%. 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 30%. This means it paid out 30% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, CAT expects solid earnings growth. The Zacks Consensus Estimate for 2023 is $17.64 per share, representing a year-over-year earnings growth rate of 27.46%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that CAT is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).
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Caterpillar Inc. (CAT) : Free Stock Analysis Report
