Caterpillar Dividend Up 7.9% to $1.63; 33rd Year of Hikes

Caterpillar declared a quarterly dividend of $1.63 a share, a 7.9% increase from the prior $1.51 payout. The dividend is payable Aug. 19 to shareholders of record as of July 20. The ex-dividend date is July 20.

The increase continues a streak of annual dividend hikes that goes back 33 years. Caterpillar first raised its dividend in 1992 and has not cut the quarterly payment since. The streak makes the company a Dividend Aristocrat, one of a select group of U.S. companies that have raised dividends for at least 25 straight years. The new dividend yields 0.76% at the current stock price, a level that reflects the stock's run-up to near all-time highs.

The CAT stock page carries a Moderate Alpha Score of 60 out of 100, reflecting the stock's balanced risk-reward profile.

Caterpillar's dividend policy has been a steady fixture of its capital allocation strategy. The company's free cash flow has grown in recent years, supported by demand for its heavy equipment in data-center construction and energy projects. The payout is well covered by earnings and cash flow, leaving room for further increases.

The 7.9% increase outpaces the average dividend growth rate for S&P 500 companies, which has been around 5% in recent years, according to data from S&P Dow Jones Indices. The forward yield of 0.76% places Caterpillar among the lower-yielding industrial stocks, a reflection of its strong price performance. The stock has risen sharply over the past three years, compressing the yield. For dividend-growth investors, the trajectory of the payout matters more than the current yield.

The stock's price-to-earnings multiple has expanded significantly over the past few years, contributing to the low dividend yield. The current multiple stands well above the 10-year average, according to FactSet data. Investors who focus on income will find the yield underwhelming compared to the broader market. For Caterpillar, the direction of the dividend increase matters more than the current yield. The company has used dividend growth as a way to reward shareholders without committing to a large payout that could strain the balance sheet during a downturn.

The ex-dividend date falls on July 20. Anyone buying after that date will not receive the upcoming payment. The stock price typically adjusts by the dividend amount on the ex-date. The long-term trend matters more for most holders.

Caterpillar's next dividend decision after August will fall in the fourth quarter, following the board's usual quarterly schedule. The board reviews the dividend each spring. Increases have also been announced at other times. The current baseline is $1.63.

The stock has gained year to date, outperforming the industrial sector index. The combination of dividend growth and capital appreciation has made Caterpillar a core holding for many industrial-focused portfolios.

The company is scheduled to report second-quarter earnings on July 30. The report will give investors a fresh look at the order backlog and free cash flow that support the higher dividend.