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Sunday, 10/12/2003

Running with the Big Dogs... or Cats
By Nich Sheldon
CAT - Caterpillar Inc.

Company Description

Caterpillar is the first engine manufacturer to offer both medium- and heavy-duty truck and bus engines that meet the U.S. Environmental Protection Agency's more stringent 2004 emissions standards. Caterpillar is the leading manufacturer and supplier of truck and bus engines in the combined medium- and heavy-duty categories in North America, holding the lead position in engine shipments to vehicle manufacturers since 1999.

For more than 75 years, Caterpillar Inc. has been building the world's infrastructure and, in partnership with its worldwide dealer network, is driving positive and sustainable change in every continent. With 2002 sales and revenues of $20.15 billion, Caterpillar is a technology leader and the world's leading manufacturer of construction and mining equipment, diesel and natural gas engines and industrial gas turbines. More information is available as http://www.cat.com .

[Source: Company Press Release]

Reasons to Invest:

Every week we do our best to highlight a company worthy of the DripAdvisor.com limelight. This week we are spotlighting a company that has been around for more than 75 years and has been a major market mover since being listed on the NYSE in 1970. Without further ado, Caterpillar Inc. (NYSE:CAT) is our Drip of the Week.

Over the past six months, CAT's revenues rose 11 percent to $10.75 Million. Also noteworthy is the fact that CAT's revenues and earnings for the second quarter (ended in June) were the highest they have ever been over the past three years.

If revenues alone are not impressive enough to add CAT to your portfolio, what would you think about a dividend increase? This heavy machinery dealer announced on Wednesday (10/08/03) that they will be increasing their dividend by $0.02 to $0.37 per quarter. The payable date for this dividend increase is November 20th, 2003, to shareholders on record by October 20th. This new dividend increase puts CAT's annual dividend at $1.48 per share per year. Caterpillar yields a 1.95% dividend.

Over the past 52-weeks Caterpillar's stock price change has been 107.08 percent. One might say that this machinery specialist is really shaking things up. Last October the stock was as low as 35.70, this October the stock has doubled that mark and has reached as high as 77.10 (10/09/03). Over the past week, CAT was the fourth most active in the DJ Heavy Machinery (DJUSHR).

In respects with growth rates, over the next year Caterpillar expects a dividend percentage of 1.45 percent. Over the next three years, they are predicting 3.85 percent. Over the next half decade they see a dividend percentage of 9.24 percent. Logically, this means that over the next five years their dividend percentage should (by CAT's estimates) only get higher, which means more profit for your pocket/portfolio.

A few emails have come in asking that I provide a little technical analysis of our Drips of the Week. In respects with CAT, technically everything is firing on all cylinders. CAT's MACD, momentum and RSI indicators are all giving off bullish signals. CAT also has a very bullish P&F chart indicating strong demand. Earnings are due out next Thursday (10/16/03). However, as I have mentioned before all of these signals are better suited for the short-term trader rather than the long-term investor.

Cyclical stocks have faired very well in this bull market, coupled with an improving economy, which was reflected in the strong ISM data two weeks ago. The expanding manufacturing sector means more business for companies like CAT. Caterpillar just recently broke out of its recent consolidation from late August through September, and since then it has been on a non-stop rampage higher. One consideration to CAT's recent strength is the possibility that the company could win a very big contract from the US government for power generators in Iraq. This deal is rumored to be worth 25-30 cents a share for CAT's 2004 earnings.

This concludes another exciting episode of the Drip of the Week. Stay tuned next week, for another DRIP worthy of the DripAdvisor.com limelight.

Until Next Week,
Nich Sheldon
Editor

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Broker Recommendations

Strong Buy         2
Buy                2
Hold              11
Sell               2
Strong Sell        0

Brokers Covering  17


DRIP Information:
Shares to Qualify = 1
Auto-reinvestment = Yes
Accept Foreign Accounts: Yes
Temper Enrollment:  Yes

Min/Max Investment = $50-$350,000/Year


Reinvestment Fees - 
Dividend investment fees: 5% to $3 + 3c/share
Cash investment fees: $5 + 3c/share
Auto reinvestment fees: $2 + 3c/share


Transfer Agent:
First Chicago Trust
800-446-2617


Corporate Headquarters:
100 NE Adams Street
Peoria, IL 61629
Phone: (309) 675-1000
Fax: (309) 675-6155



 
 

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