This offers two ways to win, as earnings head back to their $8 2011-12 peak year, a 14x multiple would offer substantial gains as CAT stock went back over $100. Earnings also peaked in 2012 and have been dropping. That’s better than it sounds, since earnings have come down along with revenues. Like in 2009, there’s a good chance that when the cycle turns, revenues will explode to new highs.Ĭheap Valuation: CAT stock currently trades at 14x earnings. Since 2012, revenue has fallen three consecutive years to just $47 billion today. Other sectors started following shortly thereafter. Gold and silver prices peaked in 2011, leading to big drops in demand for Caterpillar mining equipment. But by 2012, the the Caterpillar stock price hit new highs as revenue more than doubled to $65 billion. Caterpillar saw revenues drop by more than 30% in 2009 to just $32 billion. Historically, CAT revenues peaked at $51 billion in 2008, enjoying strong support from the overheated housing and oil and gas sectors. Transportation has also seen its share of slowness, though a new highways funding bill in the US should help a bit.

But even these segments are really starting to trail off in emerging markets including notable weakness in China and Brazil. Some markets such as residential and commercial construction in the United States are holding up. Oil and gas, base metal mining, and precious metal mining have all been on the decline for at least the past two years. The company has exposure to many different sectors, however many of them are commodity based. Caterpillar’s underlying business is heavily exposed to global economic cycles. Nearing A Cyclical Low: CAT stock is notoriously cyclical. The company still has an impressive “A” credit rating and faces no near-term pressure to cut the dividend. Caterpillar was able to maintain the dividend in 2008, and this time around isn’t all that likely to be different. Over the past 10 years, CAT shares have traditionally yielded 2%, with that yield spiking up to 5% only during the 2008 financial crisis and today. While Caterpillar has its problems (we’ll get to those in the stock cons), Caterpillar has the highest safe and sustainable dividend out of the Dow’s top blue chip stocks.Ĭaterpillar’s dividend payout ratio of 79% indicates that the company has a decent amount of excess earnings beyond what they pay in the dividend. This trails only struggling oil company Chevron ( CVX). Of the 30 bedrock American companies, CAT shares provide the 2nd highest yield, at 5%. Huge Yield: For a Dow Jones member, CAT stock offers a truly compelling yield. With the recent slowdown in the world economy, CAT stock has been falling. Anywhere you see residential building, highway construction, mining, or logging, you’re quite likely to find Caterpillar equipment in use. Founded 91 years ago, Caterpillar is the world’s largest heavy machinery company. It’s truly one of America’s most iconic companies. Be it in the Bolivian Amazon or the Guatemalan highlands, I’ve seen Caterpillar in places no other American brand has gone before what’s that say for CAT stock? But just about anywhere you go, you’ll still find Caterpillar ( CAT) vehicles. When you travel abroad, you can be far away from anything resembling home.

Cat stock pro and cons