Is It Smart To Buy Caterpillar Inc. (NYSE:CAT) Before It Goes Ex-Dividend?

Readers hoping to buy Caterpillar Inc. (NYSE:CAT) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Caterpillar investors that purchase the stock on or after the 21st of April will not receive the dividend, which will be paid on the 20th of May. The company's next dividend payment will be US$1.41 per share. Last year, in total, the company distributed US$5.64 to shareholders. Calculating the last year's worth of payments shows that Caterpillar has a trailing yield of 1.9% on the current share price of US$293.43. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Caterpillar has been able to grow its dividends, or if the dividend might be cut. Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit. Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Caterpillar has a low and conservative payout ratio of just 25% of its income after tax. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 30% of its free cash flow as dividends, a comfortable payout level for most companies. It's positive to see that Caterpillar's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut. Check out our latest analysis for Caterpillar Click here to see the company's payout ratio, plus analyst estimates of its future dividends. NYSE:CAT Historic Dividend April 16th 2025 Have Earnings And Dividends Been Growing? Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Caterpillar's earnings per share have been growing at 16% a year for the past five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later. The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Caterpillar has increased its dividend at approximately 7.3% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders. To Sum It Up Should investors buy Caterpillar for the upcoming dividend? Caterpillar has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Overall we think this is an attractive combination and worthy of further research. With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Case in point: We've spotted 2 warning signs for Caterpillar you should be aware of. Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers. If you're looking to trade Caterpillar, open an account with the lowest-cost platform trusted by professionals, Interactive Brokers.With clients in over 200 countries and territories, and access to 160 markets, IBKR lets you trade stocks, options, futures, forex, bonds and funds from a single integrated account.Enjoy no hidden fees, no account minimums, and FX conversion rates as low as 0.03%, far better than what most brokers offer.Sponsored Content