Published Mon, 17 Jul 2017 09:28:56 -0400 on Seeking Alpha
I have been bullish and bearish on Caterpillar (CAT) at different times in the past few years, but to be fair, I’ve tilted towards the latter. CAT shares have flown in the past several months on the hopes that its dreadful downturn in revenue and profits has ended, and to its credit, CAT is performing much better than it was even a year ago. But one thing that never wavered – and is a huge part of the bull case – is the dividend. CAT has always been a very strong stock when it comes to capital returns and the dividend is the most noteworthy piece of that. In this article, I’ll take a look at CAT’s dividend to see how well-financed it is and how much room for growth there is from here.
I’ll be using data from Morningstar for this exercise.
Let’s begin by taking a look at CAT's per-share payout over the past decade to get an idea of where the dividend has come from.
The first thing I’ll point out is that 2013 looks like a decline in the dividend, and technically, it did. The fiscal cliff debate was alive and well at that time and a looming hike in the tax rate on dividends inspired CAT and many others to bring forward the Q1 2013 dividend into 2012. Thus, 2012’s dividend looks inflated while 2013 looks like a decline despite a raise in the payout. That little bump is immaterial to this work, but it is worth noting since it does look a bit funky.
Now that we’ve got that out of the... Read more