Key Points
Caterpillar's stock has risen more than 110% in the past year.
Despite raising its dividend for 32 consecutive years, Caterpillar's yield is at an all-time low.
Caterpillar (NYSE: CAT) is known for its dependable dividend, having raised its payout for more than 30 years. The renowned income investment recently approved another substantial increase. So why is Caterpillar's dividend yield the lowest in its history?
The construction and heavy machinery manufacturer has seen its stock surge faster than its dividend growth, resulting in a lower yield. Shares of Caterpillar have skyrocketed more than 55% so far this year, and over 110% in the past 12 months as of this writing.
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As AI infrastructure build-outs accelerate, so does the demand for construction equipment. The increase in Caterpillar's share price has now left potential investors with a conundrum. The stock is trading at a hefty premium, particularly compared to its historical averages. The 0.75% yield means new investors aren't necessarily buying for the high income as much as for the potential of continued growth.
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Caterpillar currently pays a quarterly dividend of $1.51 per share. The stock's forward price-to-earnings (P/E) ratio is in the mid-30s, while the trailing P/E sits above 40. New investors will need to be patient over a longer period of time to justify paying a higher price. With that said, Caterpillar is in excellent shape to keep the dividend raises coming for the foreseeable future.
Catie Hogan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Caterpillar. The Motley Fool has a disclosure policy.