Caterpillar's (CAT) New Dividend Hike Looks 'Purrfect'

News that Caterpillar, Inc. (NYSE: CAT) will be raising its quarterly dividend 15.4% to $0.60 per share, or $2.40 annualized, failed to impress shareholders Wednesday. In fact, shares ticked lower after the announcement.

The reaction appears counter-intuitive given the fact that the dividend hike was above last year's dividend hike of 13% and the 4.5% hike the year prior. It also moves the dividend yield to an impressive 2.9%.

Caterpillar's dividend yield compares favorably to peers like Deere & Co. (NYSE: DE) at 2.4%, Cummins, Inc. (NYSE: CMI) at 1.7% and Joy Global, Inc. (NYSE: JOY) at 1.3%

Caterpillar CEO Doug Oberhelman highlighted the fact that the dividend hike is in conjunction with the $1 billion accelerated stock repurchase announced in April.

The dividend payout ratio on Caterpillar's new dividend is approximately 35%, based on 2013's expected earnings of $6.88/share.

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