Both Caterpillar CAT and Eaton ETN continue to deliver stellar performances in 2026, outperforming the S&P 500 by a wide margin. The stocks reflect lesser-discussed options for obtaining exposure to the artificial intelligence (AI) buildout, with their consistent dividend payouts throughout their histories making them attractive to investors with an appetite for income as well.
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Both companies have benefited from the AI buildout, with their offerings remaining critical for the continued data center craze. It’s worth noting that Caterpillar’s products generate the raw power for data centers, while Eaton manages, distributes, and cools that power within the facilities to keep AI chips running.
Caterpillar Helps Power Data Centers
Caterpillar posted robust results in its latest release, continuing a streak of impressive numbers over the past year or so. Sales of $19.1 billion marked a quarterly record, with its backlog of $51 billion climbing 70% YoY and also reflecting a record.
Its Power & Energy segment in the above-mentioned quarter helped drive the strong results, with sales of $9.4 billion climbing 23% year-over-year thanks to higher demand for power products used in data center applications, primarily large reciprocating engines.
Concerning Power Generation specifically, sales grew by a rock-solid 44% year-over-year, underpinning its favorable position in data center applications. Below is a chart illustrating the company’s quarterly sales, with clear acceleration evident over recent periods.
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The outsized sales growth has helped push shares near all-time highs, with Caterpillar’s shareholder-friendly nature also a major positive, as it deployed $7.9 billion in cash for share repurchases and dividend payouts throughout its FY25. Keep in mind that the company also holds the elite Dividend Aristocrat title.
Sales revisions for its current fiscal year remain bullish, driven by a strong demand environment, and EPS revisions reflect the same bullish trend.
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Eaton Breaks Multiple Records
Accelerating orders and continued backlog growth also contributed to a recent record-breaking quarter from Eaton, with adjusted EPS of $3.33 reflecting a record alongside all-time high quarterly sales of $7.1 billion that grew 13% year-over-year.
Strong demand for power solutions helped drive the strong results, with both its Electrical Americas and Electrical Global segments posting all-time-high sales figures. The demand picture has also boosted its cash-generating ability, with free cash flow rising 17% YoY to a new company high of $1.6 billion.
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The cash generation throughout its history has allowed it to reward shareholders nicely, currently sporting a 7.8% five-year annualized dividend growth rate. While the company isn’t a Dividend Aristocrat like CAT, Eaton has paid a dividend on its shares every year since 1923.
Below is a chart illustrating ETN’s dividend paid on an annual basis over the last decade.
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Bottom Line
Both companies above – Caterpillar CAT and Eaton ETN – have emerged as strong AI infrastructure plays, particularly on the power side. Red-hot demand pictures stemming from the buildout have led to record-breaking quarterly results for each, with shares benefiting in a big way. It’s reasonable to expect continued momentum as companies scramble to secure power products for their data centers, a trend that appears set to continue for at least a few years.
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This article originally published on Zacks Investment Research (zacks.com).