Shares of Caterpillar (CAT) rose Wednesday but less than the broader market as the world’s biggest construction equipment maker announced it will pay out its regular dividend this quarter.
The $1.03 a share dividend will be paid May 20, to shareholders of record as of April 20, just as in the prior three quarters. That gives Caterpillar a current yield of 3.3%, compared to 2.2% for the S&P 500 index.
Caterpillar has paid a cash dividend every year since the company was formed in 1925. It has increased its dividend for 26 straight years. Last year, it boosted the dividend by 20%.
Like most other companies, Caterpillar has been hit hard by the coronavirus pandemic. But Morningstar analyst Scott Pope expressed some optimism for the long term.
“At this juncture, we believe disruptions attributed to the Covid-19 response will lead to a deterioration in many of Caterpillar’s end markets in 2020,” he wrote in a report last week.
“The impact to Caterpillar will be amplified as customers will likely reduce capital expenditures to preserve cash.”
But, “we believe Caterpillar’s ongoing strategy to increase aftermarket revenue though enhanced services and technology should mitigate the impact, making even a worst-case Covid-19 scenario less severe than 2009 when revenue plummeted 39%,” Pope said.
Still, he believes that the sustained impact of the coronavirus pandemic will push Caterpillar’s revenue down 15% this year, compared to his prior estimate of a 4% decline.
As a result, Pope trimmed his fair value estimate for Caterpillar’s stock $148 from $156.
The shares recently traded at $124.06, up 1.76%, compared to a 2.1% increase for the S&P 500.