Many previous articles on this site have detailed the appeal of Caterpillar (NYSE: CAT), the world’s largest equipment company.
Due to disappointing earnings, “The Big Cat” is down for the last week and month of market action (chart below).
Long term investors should look upon this as an opportunity to develop a position at a discount. Caterpillar has tremendous appeal as a growth, value, and income stock. Due to the volatile nature of the stock, Caterpillar is likely to move up and down. Even though Caterpillar is a member of the Dow Jones Industrial Average (NYSE: DIA), it has a beta of 1.57. That means it moves up and down 1.5 times more than the stock market as a whole.
That also adds to the opportunities to buy Caterpillar after the price has fallen!
Those who have done so, as recommended by previous pieces on this site, have done very well. For 2014, Caterpillar has risen by by nearly 17 percent. Over the last year, Caterpillar is up more than 30 percent.
The high dividend yield adds to the total return for long term investors.
At present, the average dividend yield for a member of the Standard & Poor’s 500 Index (NYSE: SPY) is around 1.8 percent. Income investors should like that Caterpillar’s dividend yield is about 50 percent higher at around 2.7 percent. Caterpillar also has a strong history of increasing its dividend. From that, long term investors get a raise every time the amount of the dividend is raised by the board of directors!
Caterpillar’s management just announced a stock buyback program.
That increases the appeal of the stock. It shows that the management is bullish about the long term value of the company. For shareholders, that will come in a rising total return over the long term, especially for those who buy when the stock price declines!
Caterpillar just announced a stock buyback program.