Caterpillar hikes dividend to record levels as outlook remains rosy

Caterpillar plans to start shelling cash out to investors in historic amounts.

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The Deerfield, Illinois-based industrial giant on Thursday said it would raise its quarterly dividend by 20 percent to $1.03 per share, a record for the company. It also plans to increase the dividend every year for the next four years by “at least a high-single digit percentage.”

Meanwhile, Caterpillar plans to repurchase shares on a more consistent basis "with the goal of at least offsetting dilution in the market downturns."

TickerSecurityLastChangeChange %
CATCATERPILLAR INC.128.25-0.75-0.58%

The decision, which was released ahead of its annual investor day, comes after Caterpillar last month reported record first quarter earnings and raised its 2019 profit outlook, alleviating fears of a significant global economic slowdown this year given the firm's extensive international operations.

CEO Jim Umpleby said the firm is “a stronger and more profitable company that can produce higher free cash flow through the cycles.”

Caterpillar is hoping to improve operating margins by up to 6.0 percent above the performance levels from 2010 to 2016, underscored by what it says is a focus on “operational excellence and investing in expanded offerings and services.”

Key to the profit outlook is a focus on growing the services business. The company is hoping to double sales in the sector by 2026 to $28 billion.

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“Our enterprise strategy for profitable growth is working,” said 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."