CAT - Here's Why Caterpillar Is a No-Brainer Dividend Stock
2023-03-13 06:01:00 ET
It seems strange to advocate for a highly cyclical company as a dividend candidate, but Caterpillar (NYSE: CAT) has a strong track record of growing its dividend over the last few decades. Moreover, management intends to reduce the cyclicality of its earnings and cash flow by increasing its services revenue. It all adds up to making Caterpillar a genuine dividend-paying option for investors. Here's why.
The industrial company's current dividend payout comes to around $2.44 billion, and generates a near 2% dividend yield for income-seeking investors . Moreover, it's a dividend that management plans to increase in the coming years, backed by improving profit margins and cash flow.
To understand why, you have to go back to the investor day presentation in 2019, where management laid out its medium-term plan. The key to the plan was to raise Caterpillar's operating margin and free-cash-flow profile through the cycle, mainly by focusing on growing its services revenue from $14 billion in 2016 to $28 billion in 2026.
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Here's Why Caterpillar Is a No-Brainer Dividend Stock