With the recent buzz around Caterpillar Inc‘s (NYSE:CAT) third-quarter earnings report on Thursday, Oct. 29., some investors may be eyeing potential dividend gains.
Currently, the construction equipment manufacturer has an annual dividend yield of 0.91%, with a quarterly dividend amount of $1.63 per share ($6.52 a year).
To earn $500 monthly from Caterpillar, start with a yearly target of $6,000 ($500 x 12 months).
Next, divide this amount by CAT’s $6.52 dividend: $6,000 / $6.52 = 920 shares.
So, an investor would need to own approximately $656,245 worth of Caterpillar, or 920 shares to generate a monthly dividend income of $500.
Assuming a more conservative goal of $100 monthly ($1,200 annually), we do the same calculation: $1,200 / $6.52 = 184 shares, or $131,249 to generate a monthly dividend income of $100.
Dividend yield can change on a rolling basis, as dividend payments and stock prices both fluctuate over time.
The dividend yield is calculated by dividing the annual dividend payment by the current stock price. As the stock price changes, the dividend yield changes too.
For example, if a stock pays an annual dividend of $2 and its current price is $50, its dividend yield would be 4%. However, if the stock price rises to $60, the dividend yield falls to 3.33% ($2/$60).
Conversely, if the stock price decreases to $40, the dividend yield would increase to 5% ($2/$40).
Further, the dividend payment itself can also change over time, which can also impact the dividend yield. If a company increases its dividend payment, the dividend yield will increase even if the stock price remains the same. Similarly, if a company decreases its dividend payment, the dividend yield will decrease.
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CAT Price Action
Shares of Caterpillar gained 3.1% to close at $713.31 on Tuesday.
Analysts expect the Irving, Texas-based company to report quarterly earnings of $7.03 per share, up from $4.95 per share in the year-ago period. The consensus estimate for CAT’s quarterly revenue is $20.69 billion. It reported $17.64 billion last year, according to Benzinga Pro.
Ahead of quarterly earnings, UBS analyst Steven Fisher, on Monday, maintained Caterpillar with a Neutral and lowered the price target from $925 to $750.
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