Today, I reiterate a buy on CAT
Here we are three months later and due to an aggressive quarterly dividend increase from $.70 to $.77, CAT now solidly qualifies as a 2015 Dividend Machine. To remind you the criteria for a stock to be a Dividend Machine in 2015 are: earnings greater than dividend paid out, a yield of 3.5% or more, average annual dividend growth of at least 4% over the past five years and a D/E ratio of 1 or less or equal to industry standards.
Since I am profiling this stock when the market is closed, I will use Monday's closing price of CAT for CAT's basis. Theoretically, CAT's price could increase so much on Monday that the yield falls below the required 3.5% but I highly doubt it.
Below is a table that illustrates Caterpillar's Dividend Machine bona fides. You will see that during the last four quarters CAT earned $6.24; during the same period, CAT paid our $2.80 in dividends. Their new quarterly dividend of $.77 is a forward annualized yield of 3.547% using the closing price of $86.82 on Friday June, 26 2015. Dividend appreciation has averaged 15% over the past five years. In July 2010 CAT paid our $.44 per share and this July, the dividend is $.77 per share. D/E ratio according to MSN money is 1.58 and the industry standard is 2.02.
Since I wrote about CAT in March, the price has increased from about $81 to about $87. Not quite a 10% increase. Yet, this stock is still well below the 52 week high of $111.36.
CAT is frustrating stock and it has moved into and out of the realm of Dividend Machines. With the covered call potential, I will be adding CAT and hope that you too will consider CAT for the income producing portion of your portfolio.
Disclosure: Long CAT with calls