Sometimes,
during these market swoons, I buy what I call almost Dividend Machines. These are really good stocks that just don’t
quite meet my Dividend Machine criteria but a covered call that I sell
immediately makes up for the difference. Apple, symbol,
AAPL would be a typical example; another would be Qualcomm, symbol QCOM.
Buy
and Hold
During
these swoons, I also look for a 2015 Dividend Machine stock that I can add to
my portfolio, or a stock I already own that I want to accumulate. This would be a stock I expect to hold for a
long, long time. When I say I hold for
a long, long time, I mean that I hold a stock as long as it delivers ever
increasing income and those increases are great enough to justify a less than
3.5% current yield. Dividend Machines
have been increasing in price and many no longer pay 3.5% on the current value
even with the market swoons. I may sell
my position in a really good stock and move it to one that yields more. GPC, Genuine Parts is an example.
Caterpillar
at $80
Today,
I am looking at Caterpillar, symbol CAT.
This is such a volatile stock that you can get in and find big swings in
the stock price and use that to your advantage. If you get in at a 3.5% yield, I would call
CAT a Dividend Machine. At $80 CAT is
a Dividend Machine. I could hold CAT a long, long, time and I could move in and out if I want to.
Talk
about seeking beta; CAT has traded between $85 and $111 during the past 52
weeks. You have to go back to October,
2011 to find CAT at $80 or below. And,
it did not stay there long. But I am in
the hunt.
CAT
Dividend Machine Fundamentals
Caterpillar’s
Dividend Machine fundamentals are noted in the table below.
The
world will always need bulldozers and backhoes; so I am not worried about the
long term viability of CAT and they have a strong dividend history. Average annual dividend increases over the
past five years are 13.3%. CAT is financially
stable with a D/E ratio of 1.5 which is less than the industry standard of 1.85
(according to MSN Investing website.)
Wouldn’t
it be really nice to get it before the ex dividend date of 1/15/2015. Right now I see no compelling calls so I
will wait to about $80.
TheMoneyMadam
Disclosure: Long CAT
