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A Look at Deere’s 2Q18 Dividends

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Deere’s 2Q18 dividend

Deere (DE) has declared its regular cash dividend for 2Q18 to common equity shareholders. Deere, which has not made any changes to its dividend rate from the previous year, will pay a dividend of $0.60 per share. Peers Caterpillar (CAT) and AGCO (AGCO) paid 1Q18 dividends of $0.78 and $0.15, respectively, while CNH Industrials (CNHI) paid an annual dividend of $0.14. DE is expected to pay the dividend on May 1, 2018, to shareholders of the stock on March 29, 2018.

At the end of Deere’s fiscal 1Q18, it had 322.8 million outstanding shares. If DE does not buy back any shares until the record date, it would be paying ~$193.70 in dividends.

Should Deere increase its dividend?

The last time Deere increased its quarterly cash dividend was in 3Q14. Since then, its dividend rate has remained constant, resulting in its dividend yield falling. However, it remains to be seen if Deere can afford to increase its dividend rate. In the past four years, DE’s free cash flow has been hovering around $850 million–$930 million, with the exception of fiscal 2017, when its free cash flow was negative. Nearly 85%–95% of its free cash flow is paid as dividends, leaving no room for DE to increase its dividend unless its free cash flow is substantially increased. Investors can indirectly hold Deere through the First Trust Indxx Global Agriculture ETF (FTAG), which had invested 4.9% of its portfolio in Deere as of March 21, 2018.

 

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