10 Dividend Stocks with Sustainable Payout Ratios

8. Caterpillar Inc. (NYSE:CAT)

5-Year Average Payout Ratio: 39.72%

Caterpillar Inc. (NYSE:CAT) ranks eighth on our list of the best dividend stocks with sustainable payout ratios. The company, known for producing construction and mining equipment along with off-highway diesel and natural gas engines and gas turbines, has weathered larger challenges over its century-long history and has expanded significantly in recent years. Notably, its free cash flow has doubled over the past five years, giving the company a strong foundation to continue raising its dividend.

In the fourth quarter of 2024, Caterpillar Inc. (NYSE:CAT) reported revenue of $16.2 billion, which showed a 5% decline from the prior year. This drop was mainly due to an $859 million decrease in sales volume, driven by lower dealer inventories and reduced demand from end users. Dealer inventory levels shrank by $1.3 billion during the quarter, a sharper decline than the $900 million reduction seen in Q4 2023. Still, earnings per share climbed to $5.78, up from $5.28 a year earlier.

Caterpillar Inc. (NYSE:CAT) maintained strong financial health throughout 2024, generating $12.0 billion in operating cash flow and closing the year with $6.9 billion in cash. Over the past year, the company returned a combined $10.3 billion to shareholders—$7.7 billion through stock buybacks and $2.6 billion in dividends. Its consistent cash flow has supported 30 straight years of dividend growth. Moreover, its average payout ratio in the past five years comes in at nearly 40%. The company’s quarterly dividend comes in at $1.41 per share for a dividend yield of 1.92%, as recorded on April 17.