Through its FG Wilson, MaK, MWM, Olympian, Perkins, Solar, and Turbomach subsidiaries, Caterpillar provides a wide range of engine and power generation equipment, ranging from small diesel backup generator sets, to natural gas compressors, to industrial turbines.
A struggling global economy caused earnings to decline significantly during the latest quarterly earnings report, but Caterpillar Inc. (NYSE:CAT) should rebound strongly as the global economy improves.
The rest of the story
C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW) and Caterpillar are in different industries, and their business activities are as different as night and day. However, they share common ground by both having impressive earnings growth and excellent dividend histories.
The following chart illustrates several important metrics:
| 2012 revenues | 10 yr share price growth | 10 yr revenue growth | 10 year earnings growth | 10 yr dividend growth | Dividend Yield | Current P/E | Payout ratio | |
| CAT | $65.9 billion | 238% | 190% | 420% | 200% | 2.4% | 11.9 | 21% |
| CHRW | $11.4 billion | 224% | 240% | 490% | 775% | 2.4% | 15.9 | 28% |
The dividend yield exactly ten years ago would have been 3.4% for Caterpillar Inc. (NYSE:CAT) and 1% for C.H. Robinson. However, if you would have purchased shares in both of these companies ten years ago and held them until today, your effective yield would be 10% for Caterpillar and 9% for C.H. Robinson. The effective yield is the percentage of your initial stock purchase amount that you will receive in the future, after dividend increases have been applied. Both Caterpillar and C.H. Robinson have low payout ratios, meaning that their impressive dividend increases should continue.
As you can see in the chart, Caterpillar Inc. (NYSE:CAT) and C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW) had exceptional revenue and earnings growth over the last decade. Caterpillar and C.H. Robinson are much larger companies than they were a decade ago, therefore it will be tougher to maintain the level of growth that they have experienced over the last decade. However, I believe that they will still achieve above-average growth rates as the global economy continues to recover. In addition, they both have relatively low P/E’s, and I believe that now is a good time to consider opening or adding to a position in these companies.
The Foolish bottom line
An investor can achieve very rewarding returns over the long-term by investing in a select group of companies that are constituents of the dividend achiever index, particularly when reinvesting the dividends. Dividend reinvestment, combined with capital gains, can unleash an amazing compounding machine, creating an impressive snowball effect over the long-term. Dividend achievers, such as Caterpillar and C.H. Robinson, can allow you to experience this amazing effect.
The article Dividend Achievers For The Long Haul: Part 1 originally appeared on Fool.com and is written by Greg Williamson.
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