Dividend Increase: Caterpillar Inc. (CAT) and Target Corporation (TGT)

Caterpillar Inc. (CAT) just declared $0.86 quarterly dividend. This is an increase of 10.2% from $0.78.

I own 29 shares, so this will increase my annual dividend income by $9.28.

Target Corporation (TGT) just declared $0.64  quarterly dividend. This is an increase of 3.2% from $0.62.

I own 69 shares, so this will increase my annual dividend income by $5.52.

In total both raises increased my forward dividend income to $5773.18.

I updated both my Passive Income page as well as my Portfolio page to reflect the changes.

My Thoughts on CAT:

I was so looking forward to this dividend increase because the past two years were not impressive. In 2017 it was only a 1.3% increase and in 2016 it was there were no dividend increases. So, to say the least, I am very happy with this increase. Currently, CAT has a dividend payout ratio of 45% based on 2017 earnings. The good news in that CFRA is projecting earnings of $10.75 this year and $11.55 next year with an earnings growth of 9% for the next years. This hopefully this translates to more double-digit dividend increases.

I currently see CAT as a HOLD. It ran up pretty fast. Even though earnings are expected to be higher, I prefer to buy shares of this company when the dividend yield as at higher levels.

Source: fastgraphs.com

My Thoughts on TGT:

This increase, however, was a little disappointing. I was expecting something around 6% from them seeing how they currently have a dividend payout ratio of only 45%. This increase is 0.1% less than last year dividend increase of 3.3%. Next year I expect a better increase seeing how CFRA analysts are expecting 10% earnings growth for the next three years.

So a 10% growth and a very manageable dividend payout ratio of 45% should equal a better dividend increase at or above 6% for 2019.

I currently see shares of Target as a HOLD. Before buying, I would like to see a PE between 10-12.

Source: fastgraphs.com

What do you think of the dividend increase? 

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