The Long Term Outlook is Still Bullis...
Home  »  Community News  »  The Long Term Outloo...
John Murphy
The Long Term Outlook is Still Bullish for Caterpillar
, , , , , , ,

Long term investing is always the best way to proceed, especially for blue chip stalwarts like Caterpillar (NYSE: CAT).

For the last year of market action, Caterpillar is up over 18 percent.  But it is down for the last week, month, quarter, and six months of market action.  For 2014, Caterpillar is up around 8.6 percent (chart below).

As many previous articles on this site have noted, when Caterpillar declines, that is an opportunity for growth, value, and income investors to buy for the long term.

Like other excellent companies that do business in China such as BHP Billiton (NYSE: BHP), Caterpillar is down due to disappointing news from the world’s most populous nation. Economic activity is off in China, especially in the housing sector.  That has construction equipment company like Caterpillar and commodity firms like BHP Billiton in a slum.

But the long term outlook is still bright.

Earnings-per-share over the next five years are expected to grow at annual rate of 12.84 percent for Caterpillar.  The rate for the previous half-decade has been just 0.84 percent. Obviously, that is a very bullish trend for Caterpillar that is anticipated by Wall Street that should please growth investors.

The dividend yield pays investors to wait for the earnings to take off for Caterpillar.

At present, the average dividend yield for a member of the Standard & Poor’s 500 Index (NYSE: SPY) is just under 2 percent.  For Caterpillar, it is almost 3 percent.  That is a 50 percent premium of the mean for those firms on the Standard & Poor’s 500 Index.  Caterpillar also a history of increasing the amount of the dividend, which rewards long term investors for simply not selling the stock.

Growth in China will return.

There will be growth in other emerging market nations, too.  That will also obviously be bullish for Caterpillar, BHP Billiton, and others.  Until then, the dividend rewards long term income investors for owning shares of Caterpillar.



Share on StockTwits

Leave a reply

Your email address will not be published. Required fields are marked *