Caterpillar (NYSE:CAT) makes industrial machines, excavators, tractors and other construction equipment used to build oil wells, factories and subdivisions. CAT stock has been dragged down by worries about the trade conflict between the U.S. and China. That’s because it is a huge exporter, making its business subject to disruption by a trade war. But the current high dividend yield of CAT stock and its leverage to the recovered energy sector make it attractive for income investors.

Fear of the Future

Caterpillar’s most recent quarterly results, announced October 23, were not half-bad. Its sales jumped 18% year-over-year, and its adjusted profits were up nearly 47% YoY, in-line with analysts’ consensus outlook. But the stock had previously dropped sharply and finished the month down 19%.

Analysts tend to downgrade CAT stock before trouble hits, knowing that when Caterpillar gets in trouble, CAT stock price will drop sharply. That is the case despite the fact that the company holds $7.8 billion in cash and equivalents.

The initial reaction to the earnings was negative, but since they came out Caterpillar stock has recovered somewhat. Unfortunately, all reporters wrote about was the initial reaction to the numbers.

Analysts insisted that CAT stock is overpriced, even though its current price-earnings ratio is around 24, in-line with many other S&P 500 stocks. Analysts’ big fears are the conflict between America and China, which is a big market for Caterpillar’s construction equipment, and Caterpillar’s rising costs. The company’s costs are increasing due to higher steel prices and rising shipping costs at a time of strong global demand.

CAT Stock Is Tied to Oil

Thus, CAT stock is damned by both fears of the future and the success of the global economy. That makes no sense unless you examine recent history and see how CAT stock has been hit hard by five of the last two recessions.

That’s no joke. Caterpillar stock lost one-third of its value between the middle of 2014 and early 2016, during the oil bust. CAT stock price sank significantly during stretches of 2011 and 2012 as well.

That’s because if Caterpillar stock is tied to any single industry, it’s the energy sector. CAT’s total sales fell from $55 billion in 2014 to $38.5 billion in 2016 and have only recovered in the last two years along with the U.S. oil industry.

Analysts who think that Caterpillar’s fortunes are tied to construction are missing the point. Energy and power represented $2.4 billion out of the company’s $4.5 billion of external sales in Q3.

The Bottom Line

Given that Caterpillar’s fortunes are mostly tied to energy, which has recovered, the recent fall of CAT stock price is an opportunity for income investors, since the yield on the dividend of Caterpillar stock has reached 2.93%. Meanwhile, analysts’ one-year price target on Caterpillar stock is $156, up from $124 on November 2.

Analysts will continue to downgrade Caterpillar  when it doesn’t raise its estimates.The resulting collapses in CAT stock price create buying opportunities for income seekers. Caterpillar’s dividend has more than doubled in the last decade, and it rose unabated during the Great Recession. You should buy Caterpillar stock on weakness.

Dana Blankenhorn is a financial and technology journalist. He is the author of a new mystery thriller, The Reluctant Detective Finds Her Family, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this story.