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With three decades of consistent dividend increases and a share price gain of roughly 40% over the past year, Caterpillar Inc. (NYSE:CAT) is one of the most notable dividend stocks on the market. Analysts believe Caterpillar is a defensive strategy for long-term investors, as the company is well-positioned to benefit from the expected surge in U.S. infrastructure spending and the global economic boom. Caterpillar’s businesses are diversified across construction equipment, power generation, energy and transportation, with increasing exposure to electrification, digital solutions and alternative fuels.
Caterpillar stock has a new growth catalyst: backup power generators for data centers. As technology companies around the world set up data centers to power their generative AI apps, they need data centers with uninterrupted power access. Caterpillar’s reciprocating engines for data centers are already seeing increased demand. During its first-quarter earnings call, Caterpillar management said the company is planning a “multi-year capital investment” in its reciprocating engine division to double production for large engines and aftermarket parts compared to last year.
Caterpillar’s price/earnings ratio is around 15 as of June 25, which is low compared to the industry average of 18. Although Caterpillar’s growth faces headwinds due to a decline in construction activity in the US and European housing markets , analysts believe that the company is expected to see a recovery in growth after the start of interest rate cuts by the Federal Reserve. Wall Street expects Caterpillar’s profits to grow 5% next year and an average of 7% per year over the next five years. However, these growth expectations may increase due to Caterpillar’s expansion into new business segments such as AI, data analytics and alternative fuels.
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In addition to these growth catalysts, Caterpillar’s shareholder returns are also increasing. During the first quarter, the company allocated $5.1 billion for share buybacks and dividends. Over the past five years, the company’s dividend has grown at a CAGR of 8.6%. The stock’s payout ratio stands at 25%, meaning the company is devoting a significant amount of cash to future growth.
Against this backdrop, it would be interesting to know how to earn $500 in dividends from Caterpillar every month. Let’s find out.
How to make $500 a month from Caterpillar after the latest dividend increase
Before we begin, it’s important to note that since Caterpillar increased its quarterly dividend to $1.41 per share from $1.30 on June 12, we will use the most recent dividend for our calculations. However, keep in mind that the new dividend is payable on August 20 to shareholders of record on July 22.
First, we calculate the number of Caterpillar shares you need to buy to reach your income goal. An income of $500 per month means you generate $6,000 per year in dividends from Caterpillar. Assuming a dividend of $1.41 per share (new dividend after the last increase, effective August 20), Caterpillar’s annual dividend is $5.64 ($1.41 x 4 = $5.64).
Number of shares required = $6,000 / $5.64 = 1,063,829
To make $500 per month at Caterpillar, you would need to buy approximately 1,064 shares of the company.
Total investment needed to earn $500 per month with Caterpillar Dividends
Let’s calculate the investment you need to make in Caterpillar to reach the $500/month dividend target. We will multiply the total number of shares by the last share price. CAT closed at $330 on June 24.
Total investment required to earn $500/month in dividends from Caterpillar = $330 x 1,064 = $351,120
To receive $500 in monthly dividends from Caterpillar, you would need to invest approximately $351,120 in the company.
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This article How to Earn $500 a Month in Caterpillar Dividends After the Latest Dividend Hike originally appeared on Benzinga.com
