Caterpillar
is very weak. Fifty two week high is
about $111 and it is trading at around $81 today. That is quite a correction – thirty seven
percent.
The
world will always need CAT’s equipment.
Populations grow and develop.
Infrastructure needs to be build and repaired. Caterpillar is not the only company in this
space but it is fundamentally sound.
Let’s look at CAT’s Dividend Machine fundamentals as well as a call that
is available today.
Dividend
Machine Fundamentals
Caterpillar
earned $5.87 during the past four quarters and paid out dividends of
$2.80. Their current quarterly dividend
is $.70 per share. I would expect the
next ex-dividend date to be about April 15, 2015. The yield at the intraday price of $80.87 is
3.46%. Clearly CAT meets the criteria
of earning more than it pays out in dividends.
In order to be a Dividend Machine, I want a 3.5% yield so I will put in
a buy at $80. If I get that buy, I will
add CAT to the 2015 Dividend Machine Portfolio.
Dividend
increases are very important to conservative income investors and CAT knows how
to dig for dividends. CAT’s average
annual dividend increase over the past five years has been 13.33%.
Debt
to equity ratio (D/E) is another important variable and again CAT makes the
grade with a D/E of 1.5. Industry
standard is 1.99. These companies need
a lot of capital to build those big machines.
The
table below presents Caterpillar’s Dividend Machine Fundamentals.
CAT
Covered Call
I
often times add to positions when I can simultaneously sell a covered
call. CAT has a May $87.50 covered call
selling at about $.90. Take a look at
the covered call calculator presented below to learn how this call can deliver
10% yield gain.
Consider
Caterpillar for the income producing portion of your portfolio.
TheMoneyMadam
Disclosure: Long CAT with call positions
Update: CAT did break $80 and on 3/9 I added CAT to the 2015 Dividend Machine Model Portfolio at a price of $79.94.
Update: CAT did break $80 and on 3/9 I added CAT to the 2015 Dividend Machine Model Portfolio at a price of $79.94.
