Caterpillar (CAT) has had a rough go of things lately. The global commodity crash has gutted its mining equipment sales, and the slowdown in government spending has weighed on orders for the big machines used in infrastructure projects.
But long-term investors know that while CAT is a cyclical stock that rises and falls based on these broader economic activities, it also is a stable and reliable dividend payer. Caterpillar yields almost 2.9% at current pricing, paying out 60 cents a quarter for almost $1.6 billion in total dividends paid annually.
On top of that, Caterpillar just announced an accelerated stock buyback plan in July that would snap up $1 billion in shares across the third quarter in addition to the previous $1 billion buyback announced in June. As CEO Dog Oberhelman said in July, “Repurchasing stock in a downturn is a key part of our cash deployment strategy.”
That should tell you everything you need to know about how important buybacks are to CAT — especially when it sees its shares as undervalued.