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Caterpillar boosts dividend by 8%, adds $20 billion buyback

EditorAhmed Abdulazez Abdulkadir
Published 06/12/2024, 12:49 PM
© Reuters.

IRVING, Texas - Caterpillar Inc. (NYSE: NYSE:CAT), a global leader in construction and mining equipment, announced an increase in its quarterly dividend and an expansion of its share repurchase program. The company's Board of Directors voted to raise the dividend by eight percent, which translates to an eleven-cent hike, setting the new payout at $1.41 per share. This enhanced dividend is scheduled for payment on August 20, 2024, to shareholders on record as of July 22, 2024.

In addition to the dividend increase, Caterpillar has augmented its share repurchase authorization by $20 billion. This move is part of an ongoing program initiated in 2022 that does not have an expiration date. With this latest addition, the company is now authorized to buy back approximately $21.8 billion of its common stock.

The decision to increase shareholder returns comes as Caterpillar continues to experience robust free cash flow within its Machinery, Energy & Transportation (ME&T) segment. Chairman and CEO Jim Umpleby attributed the company's strong financial performance to the effective execution of their long-term growth strategy, which has allowed for greater returns to shareholders through dividends and stock repurchases.

Caterpillar has a longstanding history of consistent dividend payments, having distributed a cash dividend annually since its inception and quarterly since 1933. The company has also increased its annual dividends for 30 consecutive years, earning it a place in the S&P 500 Dividend Aristocrats Index.

The announcement reflects Caterpillar's commitment to returning value to its shareholders and its confidence in the company's financial stability. This news is based on a press release statement from Caterpillar Inc.

In other recent news, Caterpillar Inc. resolved a racial discrimination case, agreeing to pay $800,000 to settle claims of biased hiring practices at its Decatur, Illinois plant. The funds will compensate back wages and interest to affected job applicants, with job offers extended to 34 individuals identified by the U.S. Labor Department. Caterpillar has also committed to revise its hiring practices and provide anti-discrimination training to key personnel.

Simultaneously, Caterpillar announced its intention to delist from Euronext Paris and the SIX Swiss Exchange due to low trading volume and associated costs. The delisting from Euronext Paris is scheduled for May 28, while the removal from the SIX Swiss Exchange will occur by the end of the year. Caterpillar's shares will continue to be traded on the New York Stock Exchange, its primary listing.

In response to Caterpillar's first-quarter 2024 performance, Stifel revised the rating for the company's stock from Buy to Hold, while increasing the price target to $350 from the previous $293. The change follows sales figures slightly below expectations, but higher earnings before interest and taxes (EBIT) and earnings per share (EPS) than anticipated. The company maintains a robust backlog, with orders seeing a slight uptick of 1.7% during the quarter.

InvestingPro Insights

Caterpillar Inc. (NYSE: CAT) has demonstrated a strong commitment to shareholder value, as evidenced by its recent dividend increase and share repurchase program expansion. The company's proactive approach to capital allocation is supported by a solid financial standing, with a market capitalization of approximately $162.99 billion. Caterpillar's strategic financial moves align with its history of consistent dividend payments and its status as a member of the S&P 500 Dividend Aristocrats Index.

InvestingPro data highlights the company's financial health, showcasing a Price/Earnings (P/E) ratio of 14.95, which adjusts slightly to 14.48 when considering the last twelve months as of Q1 2024. This valuation metric suggests that Caterpillar is trading at a low P/E ratio relative to its near-term earnings growth, potentially offering an attractive entry point for investors. Moreover, the company's dividend yield stands at 1.59%, with a notable dividend growth of 8.33% over the last twelve months leading up to Q1 2024, reinforcing Caterpillar's reputation for delivering shareholder returns.

An InvestingPro Tip reveals that Caterpillar has raised its dividend for 10 consecutive years, a testament to its financial resilience and dedication to providing consistent returns to its investors. Additionally, the company has been aggressively buying back shares, which can often signal management's confidence in the company's prospects and perceived undervaluation of its stock. With a robust 6-month price total return of 26.24% as of the provided date, Caterpillar's stock has shown significant appreciation, further underscoring its appeal to shareholders.

For those looking to delve deeper into Caterpillar's financials and future prospects, InvestingPro offers additional insights. There are 12 more InvestingPro Tips available, which can provide a more comprehensive analysis of the company's performance and investment potential. Readers interested in accessing these tips can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at https://www.investing.com/pro/CAT.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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