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Caterpillar Is Getting Close To Raising Its Dividend

Apr. 15, 2018 10:42 AM ETCaterpillar Inc. (CAT)13 Comments
Diesel profile picture


  • It's been 11 quarters since CAT's dividend rose in a meaningful way.
  • I have reasons to believe that this "drought" will come to an end.
  • I'm working my way back from 2023 to show how this can be accomplished starting this year.

For many years, Caterpillar (NYSE:CAT) was known as a dividend growth company and it had a long history of raising dividends year after year; however, since the summer of 2015, the company has been going 11 quarters without a meaningful dividend increase if we don't count the 1 cent-per-share increase that happened last July, moving the company's payment from 77 cents per share to 78 cents per share. In this article, I will explain several reasons that compel me to think that a meaningful dividend raise is in the horizon.

Reason 1: CAT's balance sheet is in much better shape

In the last few years, Caterpillar has been on a mission to improve its balance sheet. The company has been adding to its cash position while reducing its debt load. As a result of this, since the big reorganization in 2015, the company's net total long-term debt dropped from $33 billion to $26 billion, representing a solid drop of 21%.


CAT Net Total Long Term Debt (Quarterly) data by YCharts

During the same period, the company's cash position improved significantly from $6 billion to $8.26 billion, an increase of 38% and this is despite the fact that the company spent a lot of money on reorganizing and reinventing itself while closing down facilities, opening new facilities, moving production from one location to another, and each of these activities are known to be capital intensive. It is very rare for manufacturing companies to increase their cash position while going through a major re-organization but Caterpillar has accomplished that.


CAT Cash and Equivalents (Quarterly) data by YCharts

Between 2014 and 2015, the biggest threat for Caterpillar was the massive amount of inventory the company was sitting on. It had too many products but not enough buyers while the company struggled to become flexible enough


CAT Finished Goods Inventory (Quarterly) data by YCharts


CAT Total Long Term Debt (Quarterly) data by YCharts


CAT Average Diluted Shares Outstanding (Quarterly) data by YCharts


CAT Revenue (TTM) data by YCharts


World GDP Growth data by YCharts


CAT Average Diluted Shares Outstanding (Annual) data by YCharts

This article was written by

Diesel profile picture
I own separate portfolios for separate goals. I have one portfolio where I have nothing but income plays, another portfolio where I have nothing but growth stocks. I also have another portfolio where I run my options plays. I try not to mix different portfolios because they all have different goals and purposes. Sometimes one of my portfolios outperform other times other do. I am a big believer of diversification of not only assets but also methods and investment philosophies. Diversification is not simply buying 20 different stocks, it is applying different methods to different goals that fit to serve an investor's short term and long term targets. I am a "long only" investor and stay away from shorting companies. I will also do a lot of delta-neutral options plays where I will try to benefit from a stock or funds lack of movement. Also a huge fan of options plays and strategies including but not limited to covered calls, iron condors, butterflies, calendar spreads, call-put spreads. I've probably tried every options play there is, sometimes with success, sometimes with failure. At Seeking Alpha, I mostly analyze and write about stocks and funds that I own or I plan on owning. I rarely ever write about a stock or fund I at least don't have intention of owning some day.

Analyst’s Disclosure: I am/we are long CAT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I've worked with Caterpillar as a consultant in the past but I don't represent the company in any way, shape or form.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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