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What Does Deere’s Current Dividend Yield Suggest?

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Deere’s dividend yield

A dividend yield is a measure of a company’s annual dividend per share relative to its price per share. It indicates how much cash an investor gets for every dollar invested in a company’s equity. A high dividend yield is a good sign, as it provides investors with a stable income.

As of April 4, 2017, Deere’s (DE) stock price closed at $109.50. With DE’s 2Q17 quarterly dividend of $0.60 per share, DE’s current dividend yield stands at 2.2%. DE’s peers AGCO (AGCO), Caterpillar (CAT), and CNH Industrials (CNHI) have current dividend yields of 0.93%, 3.3%, and 1.2%, respectively.

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Since 2011, DE’s dividend yield has been varied in the range of 1.8% to 3.2%. In 2016, DE’s dividend yield dipped after a gap of five years, and it appears that the trend might continue in 2017 as well. The decline in the dividend yield is primarily due to a stagnant dividend rate and rising prices. However, DE’s dividend yield is still higher than the yield on one-year Treasury bills and qualifies as one of the highest dividend-yielding companies.

Dividend payout

Dividend payout can be calculated by dividing annual dividend per share by annual earnings per share (or EPS) and is expressed in percentage. The metric tells the investor what percentage of earnings the company is paying out as a dividend.

Since 2011, DE’s dividend payout has been on an upward trend from 21.3% in 2011 to 49.9% in 2016. DE’s increase in dividend payout has come at the expense of falling net income per share. If the trend continues, DE might reduce its dividend. Also, a higher payout means that DE will be left with a lower amount for its future growth and expansion.

Notably, investors can indirectly hold Deere by investing in the Agribusiness ETF (MOO), which invests 6.9% of its holdings in DE as of April 4, 2017.

In the next part, we’ll look at the latest analyst ratings for Deere. 

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