Ahead of Caterpillar Inc‘s (NYSE:CAT) second-quarter earnings report, set to be released before the opening bell on Tuesday, Aug. 4, some investors may be eyeing potential gains from the company’s dividends.

Currently, the construction equipment maker has an annual dividend yield of 0.80%, which is a quarterly dividend amount of $1.63 per share ($6.52 a year).

To figure out how to earn $500 monthly from Caterpillar, start with the yearly target of $6,000 ($500 x 12 months).

Next, take that amount and divide it by CAT’s $6.52 dividend: $6,000 / $6.52 = 920 shares.

So, an investor would need to own approximately $749,625 worth of Caterpillar, or 920 shares to generate a monthly dividend income of $500.

Assuming a more conservative goal of $100 monthly ($1,200 annually), we do the same calculation: $1,200 / $6.52 = 184 shares, or $149,925 to generate a monthly dividend income of $100.

Note that dividend yield can change on a rolling basis, as the dividend payment and the stock price both fluctuate over time.

The dividend yield is calculated by dividing the annual dividend payment by the current stock price. As the stock price changes, the dividend yield will also change.

For example, if a stock pays an annual dividend of $2 and its current price is $50, its dividend yield would be 4%. However, if the stock price increases to $60, the dividend yield would decrease to 3.33% ($2/$60).

Conversely, if the stock price decreases to $40, the dividend yield would increase to 5% ($2/$40).

Further, the dividend payment itself can also change over time, which can also impact the dividend yield. If a company increases its dividend payment, the dividend yield will increase even if the stock price remains the same. Similarly, if a company decreases its dividend payment, the dividend yield will decrease.

CAT Price Action: Shares of Caterpillar gained by 0.7% to close at $814.81 on Friday.

Analysts expect the company to report quarterly earnings of $6.2 per share. That’s up from $4.72 per share in the year-ago period. The consensus estimate for Caterpillar’s quarterly revenue is $19.2 billion. It reported $16.57 billion last year, according to Benzinga Pro.

Analyst Take: Ahead of quarterly earnings, Baird analyst Mircea Dobre downgraded Caterpillar from Outperform to Neutral on July 29 and cut the price target from $1,200 to $900.

Photo via Shutterstock