After estimating that its tax rate would drop 8 percentage points this year due to GOP-led cuts, Caterpillar increased its quarterly dividend 10 percent on Wednesday.
The boost to 86 cents per share follows a prior decision by the Deerfield, Ill.-based company to repurchase as much as $500 million in common stock, and a 30.9 percent increase in quarterly sales to $12.86 billion.
“Increasing our dividend builds on our long history of dividend growth,” Chief Executive Officer Jim Umpleby said in a statement. “It also demonstrates our confidence in our strategy to pursue long-term profitable growth to deliver increased value to shareholders.”
Caterpillar, one of the world’s largest suppliers of construction equipment, ended the last quarter with $7.9 billion of cash on hand. Executives recently predicted that strong demand for construction equipment in the U.S. and China would continue, raising their 2018 profit target by $2 – to $9.75 to 10.75 per share.
One challenge for Caterpillar may be rising steel costs as a result of President Trump’s recently enacted 25 percent tariff on imports of the metal.
“We expect steel and other commodity costs to be a headwind all year,” Chief Financial Officer Bradley Halverson told investors. “However, at the end of the day, higher commodity costs benefit many of our customers, and they are one of the reasons we have seen several of our end markets begin to recover.”
Caterpillar estimated that steel costs rose 15 percent in the first three months of 2018.
