) upped its quarterly dividend by 6 cents to 52 cents to boost
shareholder value. The hike translates to a 13% increase from
the prior dividend of 46 cents, marking the highest percentage
increase in the dividend since the financial crisis of 2008.
The increased dividend will be paid on August 20, 2012, to
stockholders of record on July 20, 2012. Caterpillar has been a
consistent payer of quarterly dividends since its formation in
1925. The current dividend hike comes exactly after a year. The
last dividend hike of 5% from 44 cents to 46 cents was announced in
Prior to the recession, the company had increased its dividend
by 17% to 42 cents. During the recession Caterpillar had refrained
from hiking dividends. After a hiatus of two years, Caterpillar had
resumed its trend of increasing the dividend in June 2010. The
dividend was then raised by 2 cents or 5% to 44 cents.
Caterpillar's strategy is to deliver Total Stockholder Return in
the upper 25% of the S&P 500. The current hike represents its
continued commitment to providing value to stockholders. During the
past 10 years, Caterpillar's total stockholder return has been
322%, which is in the top 25% of the S&P 500.
Meanwhile Caterpillar continues to focus on strengthening its
balance sheet and improving cash flow. Caterpillar had cash and
short-term investments of $2.8 billion as of March 31, 2012.
Total debt-to-capital ratio improved to 67% as of March 31, 2012
from 69% as of December 31, 2011. The debt-to-capital ratio at
Machinery & Power Systems improved to 40.5% at the end of the
first quarter of fiscal 2012 from 42.7% at the end of fiscal
Caterpillar's closest competitor,
Deere & Co.
) had hiked its dividend in March 2012. Deere increased its
dividend by 12%, or 5 cents, to 46 cents. This was the tenth
consecutive year of the company's dividend hike. Caterpillar's
annualized dividend yield of 2.39% falls behind Deere's annualized
dividend yield of 2.44%. Caterpillar's dividend payout ratio of
22.56% is also short of Deere's 23.16%.
Caterpillar has kicked off 2012 on a promising note by posting
record earnings per share of $2.37 in the first quarter.
Caterpillar has its sales guidance in the range of $68 billion to
$72 billion for 2012 and raised its EPS guidance to $9.50.
This, if realized, would mark a record in Caterpillar s history,
even ahead of last year's ground-breaking results. Furthermore,
Caterpillar is sitting on a record backlog that assures a promising
2012. Caterpillar thus has ample scope to increase its dividend
Caterpillar's plans to open new facilities and expand existing
operations, particularly in the emerging markets, will boost its
long-term potential. Furthermore, the Bucyrus acquisition has
positioned Caterpillar as the leading global mining original
equipment manufacturer. However, margin headwinds, the European
debt crisis and a slowing Chinese economy may impede its earnings
growth in the near term. Thus, we maintain our Neutral
recommendation on Caterpillar in conformity with the Zacks #3 Rank
(short-term Hold rating) held by the stock over the near term.
CATERPILLAR INC (CAT): Free Stock Analysis
DEERE & CO (DE): Free Stock Analysis Report
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