Caterpillar Stock Hands $56 Bil Back – Worth a Look?

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CAT: Caterpillar logo
CAT
Caterpillar

In the last decade, Caterpillar (CAT) stock has returned a notable $56 Bil back to its shareholders through cold, hard cash via dividends and buybacks. Let’s look at some numbers and compare how this payout power stacks up against the market’s biggest capital-return machines.

As it turns out, CAT stock has returned the 48th highest amount to shareholders in history.

  CAT S&P Median
Dividends $22 Bil $4.4 Bil
Share Repurchase $33 Bil $5.5 Bil
Total Returned $56 Bil $9.1 Bil
Total Returned as % of Current Market Cap 17.3% 24.5%

Why should you care? Because dividends and share repurchases represent direct, tangible returns of capital to shareholders. They also signal management’s confidence in the company’s financial health and ability to generate sustainable cash flows. And there are more stocks like that. Here is a list of the top 10 companies ranked by total capital returned to shareholders via dividends and stock repurchases.

Top 10 Stocks By Total Shareholder Return

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  Total Money Returned As % Of Current Market Cap via Dividends via Share Repurchases
AAPL $874 Bil 21.9% $143 Bil $731 Bil
MSFT $376 Bil 12.0% $172 Bil $204 Bil
GOOGL $357 Bil 8.6% $15 Bil $342 Bil
XOM $218 Bil 36.7% $146 Bil $72 Bil
WFC $212 Bil 72.1% $58 Bil $153 Bil
META $184 Bil 10.3% $10 Bil $174 Bil
JPM $181 Bil 21.3% $0.0 $181 Bil
JNJ $159 Bil 28.6% $105 Bil $54 Bil
ORCL $158 Bil 34.5% $35 Bil $123 Bil
CVX $157 Bil 46.4% $99 Bil $58 Bil

For full ranking, visit Buybacks & Dividends Ranking

What do you notice here? The total capital returned to shareholders as a % of the current market cap appears inversely proportional to growth prospects for reinvestments. Stocks like Meta (META) and Microsoft (MSFT) are growing much faster, in a more predictable way, compared to the others, but they have returned a much lower fraction of their market cap to shareholders.

That’s the flip side to high capital returns. Sure, they are attractive, but you have to ask yourself the question: Am I sacrificing growth and sound fundamentals? With that in mind, let’s look at some numbers for CAT. (see Buy or Sell Caterpillar Stock for more details)

Caterpillar Fundamentals

  • Revenue Growth: -1.5% LTM and 4.9% last 3-year average.
  • Cash Generation: Nearly 11.7% free cash flow margin and 17.7% operating margin LTM.
  • Recent Revenue Shocks: The minimum annual revenue growth in the last 3 years for CAT was -1.5%.
  • Valuation: Caterpillar stock trades at a P/E multiple of 34.9

  CAT S&P Median
Sector Industrials
Industry Construction Machinery & Heavy Transportation Equipment
PE Ratio 34.9 24.4

   
LTM* Revenue Growth -1.5% 6.4%
3Y Average Annual Revenue Growth 4.9% 5.6%
Min Annual Revenue Growth Last 3Y -1.5% 0.1%

   
LTM* Operating Margin 17.7% 18.8%
3Y Average Operating Margin 18.9% 18.3%
LTM* Free Cash Flow Margin 11.7% 14.0%

*LTM: Last Twelve Months

The table gives good overview of what you get from CAT stock, but what about the risk?

CAT Historical Risk

Caterpillar isn’t immune to big sell-offs. It dropped over 52% in the Dot-Com crash and more than 73% during the Global Financial Crisis. The 2018 correction took it down about 33%, while the Covid slump shaved nearly 39% off its peak. Even the recent inflation shock caused a drop of around 32%. Solid fundamentals matter, but when turmoil hits, CAT can still take a serious hit.

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, and outlook changes. Read CAT Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.