Warren Buffett has only two rules for investing. Rule No. 1: Never lose money. And rule No. 2: Never forget rule No. 1.
While some investors prefer speculative stocks that bring large stock price swings, others prefer the slow and steady stocks that dish out solid dividends. Those steady dividend payouts combined with the power of compounding can make investors very wealthy over a lifetime.
Put simply, owning dividend stocks can make obeying Buffett's two rules easier, and it's a great place for many investors to start.
With that in mind, here's some good news for two dividend juggernauts, The Boeing Co. (BA 1.87%) and Caterpillar (CAT +1.26%).
Boeing's dividend soars
This week, Boeing's board of directors raised the company's authorization for its share repurchase program to $14 billion and also declared that its quarterly dividend will increase 20% to $1.09 per share. That compares favorably to Boeing's previous authorization of $12 billion, which was approved last December -- of which $5.25 billion remained -- and a quarterly dividend payout of $0.91 per share.
Chart by author. Data source: Nasdaq.com.
Boeing's dividend growth has been impressive over the past two years and has really made up for the stagnation during the past recession, where its quarterly dividend only increased about four pennies in a time span of four years. In fact, Boeing has increased its dividend for five consecutive years now and has paid a dividend consistently for more than seven decades -- not too shabby.
"We continue to take a disciplined approach to managing our financial strength, channeling our strong cash flow generation toward continued investments in the business and consistent returns for our shareholders," said Greg Smith, Boeing executive vice president of business development and strategy and chief financial officer, in a press release.
Silver lining for Caterpillar investors
It hasn't been a fun couple of years for Caterpillar investors, though many realize that's part of the game when you invest in a cyclical business. After shares lost roughly 15% of their value in 2014, this year brought another 25% decline. What's more, management has widely acknowledged that the near term isn't much brighter for its business, and its revenue is expected to decline in 2016 for the fourth consecutive year, which hasn't happened in Caterpillar's 90-year history.
Thus, the silver lining for Caterpillar investors: At least the dividend is safe, for now.
"I am pleased to announce we are maintaining Caterpillar's quarterly dividend. Our balance sheet is strong, allowing us to reward stockholders through the cycles. Paying a dividend in times of business and economic uncertainty and throughout business cycles is a priority for use of our cash," said Caterpillar Chairman and CEO Doug Oberhelman, in a press release.
Chart by author. Data source: Nasdaq.com.
Despite Caterpillar's business struggles, the company has managed to raise the quarterly dividend 83% since 2009, and it has more than doubled its dividend since 2007. It has also managed to dish out higher dividends to its shareholders for 22 consecutive years, which is impressive in such a cyclical industry. Similar to Boeing, Caterpillar is also returning value to shareholders in the form of $2 billion in stock repurchases completed this year.
Going forward, both of these companies are moving in different directions. Boeing will continue to accelerate production of multiple commercial airplane lineups and try to generate profits with its game-changing 787 Dreamliner. On the other hand, Caterpillar boasts a much better balance sheet than the last time it went through a down cycle like this, and management believes the company will survive long enough to take full advantage of the next heavy-equipment replacement cycle.
Until then, at least Caterpillar investors can bank on their dividends each quarter.
