Credits: Canva
By: Aquib Nawab
Finance
Historical Performance of Dividend Growth. Over the past 50 years, companies with growing or initiating dividends have achieved an average annual return of 10.24%, outperforming non-dividend payers at 3.95%, and dividend cutters at -0.6%.
Credits: Unsplash
With 30 consecutive years of dividend growth, Caterpillar (NYSE: CAT) has established itself as a reliable dividend stock. It currently offers a quarterly dividend of $1.30 per share, equating to a 1.8% annual yield.
Credits: Business Journal
Caterpillar maintains a sustainable dividend with a low payout ratio of only 28%, signifying its capacity to sustain dividend payments. Additionally, the company engages in share repurchases to benefit existing shareholders.
Credits: Unsplash
Caterpillar's commitment to shareholders is evident, having returned $4.1 billion to them in the first three quarters of 2023. Management also reaffirms its dedication to returning free cash flow to shareholders through dividends and share repurchases over time.
Credits: Caterpillar
Caterpillar faces potential challenges in the global demand for construction products, particularly as interest rates remain elevated. Order backlogs dipped from $30.7 billion in Q2 2023 to $28.1 billion in Q3 2023, and management anticipates ongoing weakness in China and Europe.
Credits: Caterpillar
Caterpillar appears undervalued with a current price-to-earnings (P/E) ratio of 17, compared to its five-year average of 18.9.
Credits: Unsplash
Home Depot (NYSE: HD) stock generated a 14% total return over the past year despite slowing sales and profits. Home Depot boasts nearly 37 consecutive years of paying quarterly dividends, with a history of consistent dividend increases since 2010.
Credits: Unacast
Despite challenges in the housing market and elevated interest rates, Home Depot offers a higher-than-average dividend yield, with a current quarterly dividend of $2.09 per share, equating to a 2.4% annual yield and a payout ratio of 52%.
Credits: Unsplash
Home Depot actively invests in shareholder value, having reduced shares outstanding by 7.6% over the past three years. In fiscal 2023, management allocated $6.5 billion to share buybacks.
Credits: CNBC
Home Depot navigates a challenging macro environment with sales and earnings guidance for fiscal 2023 expected to decrease by 3% to 4% and 9% to 11%, respectively. However, management remains optimistic about business operations and future growth.
Credits: Home Depot