Thursday, October 11, 2012

Recent Buy

This morning I pulled the trigger and purchased 23 shares of Caterpillar (CAT) for $82.75 per share.  Based on the recently announced quarterly payout of $0.52 per share my YOC for the position is 2.50%.  The CAT shares will provide an extra $47.84 in annual dividends before any further increases or dividend reinvestment.  I'll be receiving my first payout from Caterpillar in November with a $11.96 payout.  I was able to purchase the shares at a 16% discount to my calculated fair value.  You can check out my analysis on Caterpillar here.

While I do focus mainly on DG stocks, CAT is more of a capital gains play for the time being that happens to pay a dividend while you wait.  I believe it's undervalued by quite a bit and when the global economy is able to right itself CAT will be there to profit on the turnaround.  And the plus is that CAT is still a DG stock.  I would have preferred that the yield be higher that the 2.50% but historically CAT has not sold for an eyepopping yield.  CAT is still a solid DG stock with 19 consecutive years of dividend increases on the books and a 5 and 10 year DG rate just over 10%.  Caterpillar's cyclical nature lends to periods of high dividend growth rates followed by low dividend growth rates averaging out to solid growth rates long term.  I believe that with CAT's low payout ratio and history of dividend increases there will be plenty more to come in the future.


  1. I think you made a nice buy. You got a much better price than I did too. If CAT goes much lower I will be adding more.

    1. I was kicking myself a bit for not getting some the last time it dropped to the low $80's so I wasn't going to let this opportunity pass me by. I'm hoping with some more earnings disappointments it will drop to the mid to upper $70's and give me a chance to pick up some more shares.

      Thanks for stopping by!