Two Top Growing Dividend Stocks

Dividends are key to building wealth in the stock market, as they make up a majority of investors returns. Two strong dividend paying stocks are in the manufacturing sector, Caterpillar CAT and Deere & Co. DE. Both of these names are familiar to investors, as we see and use many of their products. Caterpillar and Deere have been growing like weeds, especially in Latin America and China, where demand for their products is ever growing. Just last month, Caterpillar reported its worldwide machine sales grew 37% in August, led by surging sales in Latin and surprisingly, North America. Caterpillar has consistently beaten Wall Street earnings expectations in the past, and with results like this, seemed poised to do so in the future. In addition to strong earnings and revenue growth, Caterpillar pays a high dividend, making it the best of both the growth and income investor worlds. Caterpillar is yielding 2.4%, just slightly less than a 10 year U.S. Treasury, and it has plenty of room to raise its dividend. Caterpillar also recently reaffirmed its prior guidance of revenue of $55–$60 billion and earnings per share in a range of $8–$10 for fiscal 2012. Deere & Co. is in a similar position, as its products are in heavy demand, as emerging markets continue to grow at fast clips, and North America experiences a slow but steady turnaround. Deere is seeing particular weakness in the European market, as it noted in its last earnings report. Deere has a smaller yield than Caterpillar, yielding 1.6%, but it trades at a slightly more reasonable valuation, at 26 times earnings to CAT's 30 times earnings, so shares are not as strongly priced for perfection as CAT is. Deere also has higher margins that Caterpillar, at 30% gross margins, making it more profitable by that metric. Both companies have similar returns on equity, around 18%. Either company is a perfect addition to your portfolio, but if you want some more agricultural exposure, DE is your play. If you're looking for more construction and mining equipment exposure, Caterpillar is the way to go. Try one of Benzinga's premium newsletters Here