Deere to pay dividend of $0.60 in May
On February 22, 2017, Deere (DE) announced a dividend of $0.60 per share for 2Q17 on the company’s outstanding common stock. The dividend will be payable on May 1, 2017, to shareholders with a record date of March 31, 2017. Deere’s peers Caterpillar (CAT) and AGCO (AGCO) have paid 1Q17 dividends of $0.77 and $0.14 per share, respectively.
Between 2011 and 2016, DE’s dividend has grown at a CAGR (compound annual growth rate) of 11.2%. DE’s dividend of $0.60 for 2Q17 is flat compared to dividends in the previous year. Prior to 2015, Deere increased its annual dividend every year since 2003. Since 2015, Deere has managed to maintain its dividend rate. At the current dividend rate, Deere’s dividend for 2017 is projected to be at $2.40 per share.
Deere’s free cash flow
It’s important for investors to know whether a company is generating enough free cash flow to sustain dividend growth, as dividends are usually paid out of free cash flows. For our analysis, we’ll consider the free cash flow generated by Deere and convert it into free cash flow per share. Since 2012, DE’s free cash flow per share has grown at a CAGR of an impressive 26.5% until the end of 2016, which is higher than its dividend growth of 11.2% over the same period. This growth indicates that DE’s free cash flow is strong enough to sustain the dividend growth.
Investors can indirectly hold Deere by investing in the iShares MSCI Global Agriculture Producers ETF (VEGI), which invests 7.8% of its portfolio in DE. The top holdings of the fund include Monsanto (MON) with a weight of 13.4% as of April 4, 2017.
In the next part, we’ll look into Deere’s dividend payout and the current dividend yield.