We recently compiled a list of the 10 Best Consistent Dividend Stocks To Invest In Right Now. In this article, we are going to take a look at where Caterpillar Inc. (NYSE:CAT) stands against the other dividend stocks.
Stocks that pay dividends, especially those backed by strong financial health and attractive yields, offer investors a reliable income stream, protection during market declines, and the potential for steady investment growth. This year, investors have faced a dilemma: stick with their current strategies or shift focus toward the leading technology stocks driving much of the market’s gains. At the same time, many are considering how best to prepare their portfolios for a potential economic slowdown, given uncertainty about the Federal Reserve’s ability to achieve a soft landing. Analysts recommend incorporating dividend stocks into portfolios to better navigate these conditions.
Also read: 8 Magnificent Dividend Growth Stocks to Buy Now
Savita Subramanian, an equity and quant strategist at Bank of America Corp., also advised investors to load up on dividend stocks. Here is what the analyst said:
“You want to be in safe dividends — and I know this is the most boring call of all time, but sometimes boring is good. We believe that we are now in a total return world in which the contribution of dividends to total market returns could be significantly higher than it was in the last decade, a period marked by falling cash yields and lofty price returns. We advise investors to seek out companies with above-market and secure (not stretched) dividend yields.”
Investors have shown growing interest in companies that consistently increase their dividends. This has pushed many firms to prioritize maintaining and growing dividends, even during economic challenges. Such efforts have paid off, as companies with a history of dividend growth have delivered strong long-term returns. A report by Cohen & Steers highlighted this trend, noting that between 2000 and 2010, dividend-paying companies outperformed non-payers by an annual margin of 620 basis points while exhibiting significantly lower risk, as measured by standard deviation. Over a 30-year span ending in 2011, the benefits of dividend-paying firms were even more evident. Among these, companies that initiated or raised dividends within the prior year consistently outperformed both other dividend payers and non-payers, achieving higher returns with reduced volatility.
In addition to offering strong returns, stocks with consistent dividend payouts have become a vital source of personal income. Research from S&P Dow Jones Indices revealed that dividends have steadily grown as a share of personal income over the last four decades. Since Q4 1980, the contribution of dividends to personal income has risen from 2.68% to 7.88% in Q2 2024, while income from interest has declined from 14.58% to 7.61% during the same period. The report also highlighted the impressive growth of dividends among companies in the U.S. Dividend Growers Index. Over the past 15 years, these companies have achieved an average annual dividend growth rate of 13.71%, significantly outpacing the 2.21% average annual growth rate of the US Consumer Price Index (CPI) over the same period.
Dividend stocks are bound to regain their prominence, even though the tech sector has been dominating the spotlight lately. In view of this, we will discuss some of the best consistent dividend stocks to buy.
Our Methodology:
We compiled this list by examining Insider Monkey’s Q3 2024 database and identifying companies that have consistently increased their dividends for a minimum of 15 consecutive years. From this pool, we specifically chose stocks with dividend yields of at least 1% as of December 4. The stocks are ranked in ascending order of the number of hedge funds having stakes in them as of Q3 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A construction crew operating a hydraulic shovel during a nighttime project.
Caterpillar Inc. (NYSE:CAT)
Number of Hedge Fund Holders: 50
Caterpillar Inc. (NYSE:CAT) is an American company that specializes in construction, mining, and other engineering equipment. The company operates through multiple segments, catering to diverse industries such as construction, mining, and power generation. Its extensive product range helps reduce dependency on any single sector or region, offering resilience during economic uncertainties. In recent years, Caterpillar has prioritized expanding its product lineup and incorporating sustainability into its operations. These strategic efforts focus on achieving sustained profit growth by addressing changing customer demands and advancing technological capabilities. This approach strengthens its position as a market leader, enabling it to influence industry trends while maintaining a competitive edge in pricing and innovation.
The third quarter of 2024 was challenging for Caterpillar Inc. (NYSE:CAT). The company reported revenue of over $16 billion, which fell by 4% from the same period last year, and also missed analysts’ estimates by $133.6 million. The Construction Industries segment experienced a 9% drop in sales, mainly attributed to lower sales volumes and adverse price adjustments.
Despite these challenges, Caterpillar Inc. (NYSE:CAT)’s cash generation remained strong. The company reported an operating cash flow of $3.6 billion and its enterprise cash came in at $5.6 billion. Its cash position allowed it to distribute $0.7 billion to shareholders through dividends. On October 9, the company announced a quarterly dividend of $1.41 per share, which was in line with its previous dividend. Overall, it has been growing its dividends consistently for the past 30 years, which makes CAT one of the best dividend stocks on our list. The stock’s dividend yield on December 4 came in at 1.41%.
Insider Monkey’s database of Q3 2024 indicated that 50 hedge funds owned stakes in Caterpillar Inc. (NYSE:CAT), up from 49 in the previous quarter. The total value of these stakes is over $7.4 billion.
Overall CAT ranks 7th on our list of the best consistent dividend stocks to invest in right now. While we acknowledge the potential of CAT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CAT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
