Nevertheless, Caterpillar's recent strategic efforts have emphasized how high a priority it puts on dividends. With a yield half again higher than Deere's, Caterpillar prides itself on having a strong balance sheet, leaving it in a solid position to take measures like incurring debt if it needs to in order to sustain dividend levels temporarily. In addition, cash flow remains robust, and the company has worked hard to cut costs and squeeze as much operating margin as possible. With expectations for capital expenditures falling, Caterpillar won't need as much money for internal investment in a sluggish economic environment, and that should free up further cash to go toward dividend payments if necessary.
When will Caterpillar's dividends rise again?
Caterpillar's management also has said that it's behind keeping the dividend as healthy as possible. At its most recent quarterly news conference, CEO Doug Oberhelman said, "The dividend is a priority use of cash. ... We've paid a dividend every year for over 20 years, and maintaining that is a key use of our cash and a priority for our company." Many companies that make similar statements later have to pull back from them if conditions worsen, but back in June when Caterpillar announced its most recent dividend increase, Oberhelman specifically noted the company's track record of boosting dividends "despite periods of business and economic uncertainty." That's a decision Deere hasn't made, instead keeping its dividend stable throughout 2015 as it goes through some similar challenges of its own.
Accordingly, it's reasonable to expect that as long as Caterpillar can manage to keep 2016 earnings from falling further from their current depressed levels, shareholders should see higher dividend payments around the middle of the year. The growth rate might well slow, but as Caterpillar approaches the quarter-century mark in terms of higher payouts, the stakes of allowing the dividend-boost streak to end get larger, and Oberhelman and his team look prepared to do whatever it takes to keep providing dividend growth to shareholders.
The article Will Caterpillar Inc. Raise Its Dividend in 2016? originally appeared on Fool.com.
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