Why Caterpillar Stock Zoomed Nearly 10% Higher on Wednesday

In times of volatility, investors often find comfort in a company maintaining a steady-as-we-go policy.

That, combined with vastly improving sentiment on manufacturing companies, pushed industrial vehicle specialist Caterpillar's (NYSE: CAT) stock to a gain of just under 10% on Hump Day. That bounce was higher than even the ultra-frothy S&P 500 index's 9.5%.

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Same as before

Caterpillar's consistency came from its dividend policy. That morning, it declared that its next quarterly payout would be $1.41 per share, an amount matching the previous three distributions. Such a move is a positive signal to investors that the company will do well enough to at least keep the dividend level.

It's also likely to bump higher next time, as Caterpillar consistently declares an annual dividend raise; it has done so for 30 years running. The 2024 version was an 8% hike to the present level. Its yield is 1.9%.

Caterpillar's lift was also due to the pause of a swath of tariffs enacted by the Trump administration last week. A protracted trade war would be a monster headache for the company, as it could suffer from both higher input costs (for commonly imported materials like steel) and weakening demand from clients facing similar challenges.

Investors want to see more good news

In such up-and-down times, the value of comfort rises. Caterpillar's dividend declaration provided some and combined well with the market's overall relief that many tariffs won't be as imposing as they first seemed. However, I feel investors will need more than comfort and relief if they're going to keep bidding up this stock.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.