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Caterpillar Inc. (CAT): Bound to Blossom

Nowhere to go but up!

Caterpillar Inc. (NYSE:CAT) is also not too happy as dealers seek to reduce their inventories (dealers shed $700 million in equipment inventory in the first quarter of 2013). However, when growth eventually resumes (which it most definitely will), these dealers are bound to rebuild their inventories. As it enjoys the position of world leader in quality and innovative branded equipment, Caterpillar’s North American market is rather secure and expansionary operations in Europe and East Asia are already underway. Caterpillar’s stock is sure to soar once global development and infrastructure-building eventually resume. For a company with a historical price-to-earnings ratio near 20, buying in at under 9 would be a ‘positively genius’ investment move.

A robust reputation

Furthermore, the company has proven to be remarkably resilient in the face of the harshest challenges; surviving some of the worst recessions in its 88 year history, reporting a total of only 16 annual losses (most of which were during the Great Depression). Even in the 2008 depression, Caterpillar Inc. (NYSE:CAT)’s stock remained profitable and actually outperformed S&P 500. The underlying success strategy was tactful cost-cutting in the areas of R&D and capital expenditures, and caterpillar has again made preparations for cutbacks in case of an economic downturn. Caterpillar has prepared itself to remain profitable even if sales were to fall by 40%; truly representing a stock that can help investors though another recession.

Caterpillar Inc. (NYSE:CAT) is reputed for its legendary dedication to preserving and growing the dividend payout, regardless of share price. Its poor current stock performance has pushed up the yield on dividend to 3%. CEO Doug Oberhelman has assured modest dividend growth, promising to never ever cut dividends. For the past thirty years, Caterpillar has raised its dividend by an average of more than 13% annually. Just this month, even in the face of declining sales in 2013, Caterpillar increased its dividend by 15%. For investors seeking stable, growing income, it would be extremely unwise to pass by Caterpillar’s stock.


Abbey Monnin has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

The article Caterpillar: Bound to Blossom originally appeared on Fool.com.

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