There have been many articles detailing the virtues of Caterpillar (NYSE: CAT) as a growth, value, and income stock.
This week, Caterpillar was a momentum stock, rising more than 4.6 percent (chart below).
The reason for the short term surge was Caterpillar reporting better earnings than expected by Wall Street. Concerns about global growth pounded Caterpillar stock in the short term. But The Big Cat proved the investment community wrong with robust results. It soared more than 6 percent on just one day. Along with strong results from 3M (NYSE: MMM), amonthe member of the Dow Jones Industrial Average (NYSE: DIA), Caterpillar took the entire market higher. As to be expected, that much of a gain on just one day could not be sustained. But it was a good week for the shareholders of Caterpillar, and thus the stock market as a whole.
That should be expected for the long term by those owning Caterpillar stock, too.
Caterpillar is the world’s largest heavy equipment maker. The Big Cat, based in Illinois, has a global network of dealers, factories, and other facilities. It is particularly active in China, India, and other emerging market nations. Often times, Caterpillar is viewed as a proxy for growth in China. That is where most of the growth around the world will come in the decades ahead. Japan and Europe are still in slow growth modes.
That is why Wall Street is bullish about the prospects of Caterpillar.
Earnings per share over the past five years for Caterpillar were just 0.30 percent. For next year, earnings-per-share are expected to be 13.38 percent. Over the next five years, earnings-per-share for Caterpillar are projected to be 12.84 percent by the Wall Street analyst community.
When the dividend yield of over 2.8 percent is added in, it makes for a very healthy total return for long term shareholders of Caterpillar!