Staying committed to its focus on delivering incremental returns
to shareholders, the board of directors of
) has approved a 17% increase in its quarterly dividend, the
highest percentage increase since 2010. The hike also reflects its
balance sheet strength.
Caterpillar will now pay 70 cents per share to its shareholders
every quarter, 10 cents more than the prior dividend of 60 cents
per share. The increased dividend will be paid on Aug 20, 2014, to
shareholders of record as of Jul 21, 2014. The current dividend
hike comes exactly after a year. The last dividend hike of 15% from
52 cents to 60 cents was announced in June 2013.
Caterpillar follows the likes of its competitors ???
Deere & Company
Joy Global Inc.
) ??? both of which had announced dividend hikes in May this year.
Deere upped its quarterly dividend by 9 cents or 18% to 60 cents
per share, marking the 12th consecutive year of dividend raise for
the company. Joy Global had announced a 14% jump in the quarterly
dividend rate to 20 cents per share from the previous rate of 17.5
With the increased dividend, Caterpillar's dividend yield will go
up from the current 2.21% to 2.58%, close to Deere's 2.60% and
double of Joy Global's 1.30%. At current levels, Caterpillar's 5
year average dividend yield of 2.25%, 5 Year Dividend Growth Rate
of 6.70% and Payout Ratio of 38.97% are above the industry average
of 1.98%, -4.44% and 14.27% respectively.
Despite weakness in its mining-related sales, Caterpillar returned
over $5 billion to shareholders through share repurchases and
dividends since 2013 till the first quarter of 2014. In the first
quarter, Caterpillar repurchased approximately $1.7 billion of its
common stock under an accelerated stock repurchase transaction
completing its $7.5 billion repurchase authorization. In Jan 2014,
its board approved a new authorization to repurchase up to $10
billion of Caterpillar common stock, which will expire on Dec 31,
2018. Share repurchases will be accretive to earnings in 2014 and
provide support to the stock.
Caterpillar also delivered an impressive first quarter with
earnings increasing 22% to $1.61 per share despite revenues
remaining flat year over year at $13.2 billion. The company's
incessant efforts to cut down costs, continued deployment of lean
manufacturing initiatives and improvement in the Construction
segment helped mitigate the effect of lower mining-related sales on
Caterpillar expects revenues in 2014 to be flat with 2013 or move
up or down in a 5% range. Caterpillar will benefit from recovery in
the U.S. construction sector, macroeconomic stabilization in
Europe, growth in the Chinese Excavator market and a strong
Caterpillar currently retains a Zacks Rank #2 (Buy). Another
stock that is worth considering in this sector is
) with a Zacks Rank #1 (Strong Buy).
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