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Caterpillar Stock Rises on Shareholder-Friendly Initiative

Story Highlights

With a sound capital deployment policy, Caterpillar seems to have all the right ingredients to make its investors happy.

Caterpillar Inc. (NYSE: CAT) boosted the wealth of its shareholders after the company announced a hike in its quarterly dividend rate. The market reacted positively to the news, which was evident from a 1.2% increase in the stock price on Wednesday. CAT stock ended the day at $229.80.

The company’s board of directors has approved an 8% hike, or $0.09 per share increment, in the quarterly dividend rate. The new rate now stands at $1.20 per share (versus the earlier rate of $1.11 per share), which will be given to all shareholders in the company’s record on July 20, 2022.

The dividend distribution date has been fixed at August 19, 2022.

The annual dividend rate of this construction and mining equipment maker is now at $4.80 per share, higher compared with the previous rate of $4.44 per share.

The company’s Chairman and CEO, Jim Umpleby, opined that the dividend hike is reflective of CAT’s “strong balance sheet and liquidity position” as well as its “confidence in continued strong free cash flow generation from Machinery, Energy & Transportation (ME&T).”

Wall Street’s Take

On TipRanks, Caterpillar has a Moderate Buy consensus rating based on 11 Buys, three Holds, and two Sells. CAT’s average price target of $240.93 suggests 4.84% upside from current levels. Shares of the company have declined 2.1% over the past year.

A few days ago, Michael Feniger of Bank of America Securities maintained a Hold rating on CAT while increasing the price target to $224 (2.52% downside risk) from $215.

The analyst is impressed with the company’s tech leadership and views that “a more significant, sustained step up in pricing power could help illustrate that CAT is getting fully rewarded for its tech…”

Also, another analyst, Ivan Feinseth of Tigress Financial maintained a Buy rating on CAT with a price target of $282 (22.72% upside potential).

Bloggers’ Stance

As per TipRanks, financial bloggers are 90% Bullish on CAT, compared with the sector average of 69%.

Conclusion

Caterpillar is committed to rewarding its shareholders handsomely. This is expected to help the company enhance its investment and competitive appeal.

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