Our analysis is based on comparing Caterpillar, Inc. with the following peers – Deere & Company, Cummins Inc., Joy Global Inc., CNH Industrial NV, Komatsu Ltd. Sponsored ADR, Astec Industries, Inc. and General Electric Company (DE-US, CMI-US, JOY-US, CNHI-US, KMTUY-US, ASTE-US and GE-US).
Caterpillar, Inc.’s dividend yield is 3.30 percent and its dividend payout is -2800 percent. This compares to a peer median dividend yield of 1.93 percent and a payout level of 30.34 percent. This relatively higher dividend yield and lower payout ratio makes the company a good candidate for dividend investors looking seeking good current dividend income within this peer group. In addition, the company’s relatively good dividend quality score of 92 out of a possible score of 100, underscores its attractiveness for dividend investors.
Dividend Quality Overview
- Over the last twelve months (prior to December 31, 2016), CAT-US paid a high quality dividend, which represents a yield of 3.30% at the current price.
- Dividend quality trend has not been consistent over the last five years. Dividends were paid during each of these years — of these 4 were high quality and 1 was medium quality.
- The ending cash balance, with a dividend coverage of 4.00x, provides a substantial cushion in case of a significant reduction of cash flows in the future.
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Over the last twelve months (prior to December 31, 2016), CAT-US paid a high quality dividend.
The source of the company’s cash to support the dividend paid over the last twelve months is operating cash flow (coverage of 3.12x), investing cash flow (coverage of -0.98x), issuance cash flow (coverage of -0.73x) and twelve-month prior cash (coverage of 3.62x), for a total dividend coverage of 5.00x.
CAT-US‘s issuance cash flow includes outflows from net debt repayment (coverage of -0.73x) and net share buybacks (coverage of -0.01x). Thus, the total coverage including share buybacks is 5.01x, which reflects our assumption that the cash paid for share buybacks is discretionary and could instead be used to pay dividends.
These coverage ratio factors imply that the firm’s dividends are wholly paid from operating and investing cash flows net of any debt repayments, which suggests a high dividend quality.
|Dividend Yield (%)||2.75||1.92||2.92||4.44||3.31||3.3|
|Dividend Payout (%)||23.11||38.96||44.22||70.33||-2800||-2800|
A complete list of metrics and analysis is available on the company page.
Caterpillar, Inc. is engaged in the manufacturing of construction & mining equipment, diesel & natural gas engines, industrial gas turbines and diesel-electric locomotives. It provides technology for construction, transportation, mining, forestry, energy, logistics, electronics, financing and electric power generation. The company operates through the following segments: Construction Industries, Resource Industries, Energy & Transportation and Financial Products. The Construction Industries segment supports customers using machinery in infrastructure and building construction applications. The Resource Industries segment responsible for supporting customers using machinery in mining and quarrying applications and it includes business strategy, product design, product management and development, manufacturing, marketing and sales and product support. The Energy & Transportation segment supports customers in oil and gas, power generation, marine, rail and industrial applications. The Financial Products segment line business provides a wide range of financing alternatives to customers and dealers for Caterpillar machinery and engines, solar gas turbines as well as other equipment and marine vessels. Caterpillar was founded on April 15, 1925 and is headquartered in Peoria, IL.
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