Caterpillar Inc. (CAT) - Get Report boosted its quarterly dividend Thursday, and said it would increase stock buybacks on a consistent basis, as it revealed new financial targets ahead of its investor day presentation in North Carolina.
Caterpillar said it will raise its dividend payment by 20% to $1.03 per share, with the expectation of increases of "at least a high single-digit percentage" over the next four years. Caterpillar also said it plans to repurchase shares "on a more consistent basis" with its remaining free-cash flow, with a goal of offsetting dilution during market downturns.
"Our enterprise strategy for profitable growth is working. We achieved or exceeded the financial targets we communicated during our 2017 Investor Day, which resulted in record profit per share in 2018 and the first quarter of 2019," said Caterpillar Chairman and CEO Jim Umpleby. "We will continue to execute our strategy while investing to double services sales by 2026, an area of significant opportunity for further profitable growth."
Caterpillar shares were 1% lower on Thursday to $136.83.
Last month, Caterpillar reported better-than-expected first-quarter earnings on strong sales of its machinery and equipment, while raising its profit outlook for the year, in a sign that Chinese tariffs and a general economic slowdown aren't having as negative an impact as perceived.
The Dow component said its sees full-year earnings in the region of $12.06 to $13.06 a share, but noted its expectations for full-year 2019 performance are unchanged. Caterpillar earned $1.88 billion for the first quarter, or $2.94, topping the Street forecast of $2.83. Sales came in at $13.5 billion, above last year's $12.9 billion and higher than consensus estimates of $13.3 billion.
"Through the execution of our strategy, Caterpillar is now a stronger and more profitable company that can produce higher free cash flow through the cycles," Umpleby said. "We plan to return substantially all ME&T free cash flow to shareholders through dividend increases and more consistent share repurchases to create more long-term value for shareholders."