It doesn’t happen often. A 100-year-old machinery company doesn’t usually double in a year. But Caterpillar isn’t your grandfather’s tractor maker anymore, at least not entirely.
The dividend stock has surged roughly 100% over the past 12 months, making it one of the best performers in the Dow Jones Industrial Average.
And while the big yellow machines are still part of the story, a quieter revolution inside the company has done most of the heavy lifting.
The secret? Artificial intelligence and the massive amount of power needed to run it.
AI boom has driven CAT stock higher
Every time a large language model processes a request or a hyperscaler trains a new AI system, it needs electricity.
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Data centers are racing to build out capacity, and they need generators, turbines, and engines to keep the lights on, sometimes before the local power grid can even catch up.
That’s where Caterpillar (CAT) comes in.
In the fourth quarter of 2025, Caterpillar’s Power Generation salesjumped 44%, fueled by rising demand for generators and turbines supporting AI data center construction.
The company even landed one of the largest single power contracts in its history, committing to supply generators for a massive data center project in Mason County, West Virginia.
Power and energy sales also grew at a steady pace and became Caterpillar’s largest revenue contributor, a remarkable shift for a company long defined by its construction and mining equipment.
Group President, Rodney Shurman put it plainly at a recent investor conference:
The infrastructure that powers today’s digital world, data centers, pipelines, natural gas compression, runs on Caterpillar equipment.
To meet demand, Caterpillar is investing$725 million at its Lafayette, Indiana plant to expand production of piston-driven engines used in generators. It is also working toward more than doubling turbine engine capacity by 2030.
The blue-chip dividend stock has a steady payout
For income investors, Caterpillar has a long and consistent track record. The blue-chip dividend stock has paid a cash dividend every year since it was formed and has paid a quarterly dividend since 1933.
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It has raised its annual dividend for 31 consecutive years and is a member of the S&P 500 Dividend Aristocrats Index.
In June 2025, the board raised the quarterly dividend by $0.10, a 7% increase, to $1.51 per share.
With an annual dividend expense of $2.7 billion, CAT ended 2025 with a free cash flow of $8.92 billion, which indicates a payout ratio of around 30%.
Its free cash flow is projected to increase to $16.32 billion in 2030, while the annual dividend could increase $8.10 per share.
Key dividend metrics for CAT stock right now:
- Quarterly dividend: $1.51 per share
- Annual dividend: $6.04 per share
- Dividend yield: approximately 0.80% (yield has compressed as the stock price surged)
- Payout ratio: approximately 31% (leaving ample room for future growth)
- 10-year dividend growth rate: approximately 7% per year
- Consecutive years of dividend growth: 31+ years (Dividend Aristocrat)
- Payment frequency: Quarterly
The low yield reflects just how much the stock price has run. A year ago, CAT’s historical average dividend yield was closer to 1.8%.
The stock has simply outpaced the dividend. But with a payout ratio around 31%, there is plenty of room for the company to keep raising the dividend and management has guided for high-single-digit increases through 2030.
A record backlog for the dividend stock
It isn’t just the Power & Energy story driving enthusiasm. The entire business entered 2026 with momentum.
Caterpillar
Caterpillar’s backlog reached a record $51 billion, with strong order trends across all three segments: Construction Industries, Resource Industries, and Power & Energy.
At a recent CONEXPO fireside chat, Creed said fourth-quarter orders in oil and gas were a record, and Construction Industries posted one of its best quarters ever for orders.
In 2025, Caterpillar’s revenue was $67.59 billion, an increase of 4.29% compared to the prior year.
Management is targeting 5-7% average annual revenue growth through 2030, supported by services expansion and the AI-linked power buildout.
Tariffs and risks worth watching
No bull case comes without risk. Caterpillar has absorbed significant headwinds from tariffs.
- The company faces roughly$2.6 billion in tariff-related costs in 2026, and the adjusted operating margin for 2025 came in at 17.2%, down from prior-year levels.
- CFO Andrew Bonfield noted at a recent Barclays conference that without tariffs, margins would have been toward the top end of their target range.
- Caterpillar is working on mitigation steps but has been deliberate about not making supply chain changes that could prove unnecessary if tariff conditions shift.
The good news is that strong order momentum across all three segments provides real cushion. And as Creed put it at CONEXPO, “we have tremendous momentum in all three segments.”
Caterpillar is incorporated in Irving, Texas, and was originally known as Caterpillar Tractor Co. when it was founded in 1925.
Today it is the world’s largest manufacturer of construction and mining equipment, with a sprawling portfolio that also includes off-highway diesel and natural gas engines, industrial gas turbines, diesel-electric locomotives, and financial products.
Its dealer network spans the globe, giving the company a distribution advantage that is nearly impossible to replicate.
Whether you’re drawn in by the AI power theme or the 31-year dividend growth streak, CAT is a stock that’s earned a closer look.
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