Seeking Alpha
Tech, long/short equity, deep value, growth
Profile| Send Message|
( followers)  

Earlier this week, we published our usual list of the top 100 dividend stocks from the S&P500 (NYSEARCA:SPY) . As is always the case, we then did further research for our free mailing list by taking a deeper look into the top stocks looking for ones that go well beyond the typical high paying dividend stock that will not be able to improve on its payout much in the coming years. In the context of building a passive income dividend portfolio, that seems like a far superior strategy. We did end up changing a few different things in our filtering strategy and one of the stocks that seemed to do very well is Illinois based Caterpillar Inc (NYSE:CAT).

What Is Cat?

It’s a leading producer of heavy equipment founded in 1925 in California that now operates worldwide with 2010 revenues surpassing $40 billion. The company obviously does better in times of economic strength but given its exposure to emerging markets and the fact that countries like China seem to be building up their cities at a record pace, the outlook remains very solid for CAT. That being said, how does CAT rank as a dividend growth play? Let’s take a deeper look using the 20 things that we look at when judging dividend stocks.

Dividend Metrics

(Click charts to expand)

Ticker Name Current Dividend Yield 5 year Dividend Growth

1 year Dividend Growth

CAT Caterpillar Inc 1.56 11.97 4.76

No doubt, Caterpillar does not have the most attractive current yield but it is still reasonable and I think it’s fair to say that the recent dividend growth has been very solid and if the company can keep up the hikes and have them be consistent, Caterpillar would be considered a good long term dividend play in my opinion.

Company Metrics

Ticker Name Sales Growth (1 year) Sales Growth (5 year) Earnings growth P/E ratio Margins growth Payout ratio Return on Equity

Debt to Capital Ratio

CAT Caterpillar Inc 31.46 9.82 47.46 20.15 1.37 40.85 27.6 0.47

No doubt, these metrics are impressive. The sales growth (both 1 year and 5 years) as well as the earnings growth are very solid when you consider how big the business is. I do find the P/E ratio high and that does bother me a bit but the payout ratio is fairly low and the company has a reasonable amount of debt.

Stock Metrics

Ticker Name Trend Analysis Price Trading Volume
CAT Caterpillar Inc 100 113.27 6519122.5

Industry Metrics

I think that Caterpillar is in a very favorable scenario honestly. It is a leader in an industry that is very difficult to penetrate, has a brand that as associated with quality products which in this industry gives it a significant advantage. I do not see any major threats to Caterpillar’s continued high growth mode.

Fit within your portfolio

Apart from the expensive P/E ratio, everything else seems to indicate a solid buy of Caterpillar and I personally think that any long term dividend portfolio could benefit from CAT as it is a unique company that remains independent of the economic context.

Disclosure: No positions on CAT

Source: Dividend Analysis: Caterpillar Inc.