Caterpillar's Share Price Dip May Attract Dividend Investors

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Investors buy stocks for all sorts of reasons, and when it comes to a company like Caterpillar (NYSE: CAT), there will be no end of debate as to what to do with the stock. If you're worried about the possibility of earnings disappointments to come, then the stock is worth avoiding. However, a dividend-focused investor might welcome the recent stock price decline as an opportunity to buy into a stock on a 3.2% dividend yield, with a management team committed to hiking dividend payments in the future. Let's take a closer look at what's going on.

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There's no way to sugarcoat the deterioration in Caterpillar's end markets, and its management certainly didn't try to do so when discussing its fourth-quarter earnings. CEO James Umpleby began the earnings call by declaring, "Sales to users for all three segments were lower than our expectations," and his outlook for 2020 was not much better in tone. Here's a summary of the guidance, with added notes by the author.

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