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4 Companies Increasing Dividends by Double Digits

There are several dividend growers that recently increased their dividends by double-digits.  In general, a dividend increase indicates financial strength and management’s positive earnings outlook to commit to an increased dividend in the quarters ahead.  Here is a list of the most recent dividend increases:

PetSmart (PETM), , the leader in pet specialty retail,  raised its quarterly dividend 18% and authorized a new $ 525 millionshare buyback, as the pet retailer looks to boost shareholder value.  The two and half cent increase to 16.5 cents a share will cost the company about $10.8 milliona year.  The new buyback program starts on June 30 and will be in addition to any unused amount as of that day. It expires in January 2014. The company’s market value is $7.2 billion.  The dividend of $0.165 will be paid on August 10, 2012 to stockholders of record at the close of business on July 27, 2012. This is equivalent to an annual rate of $0.66 per share.  PETM has a dividend growth 5-Year average of 36%.  PETM has an equity summary score of 8.7 out of 10 for a Bullish outlook.

Yamana Gold (AUY) is a Canadian-based gold producer with significant gold production, gold development stage properties, exploration properties, and land positions in Brazil, Argentina, Chile, Mexico and Colombia.  AUY announced that the Board of Directors has approved a $0.04 increase in the Company’s annual dividend to $0.26 per share beginning in the third quarter of 2012.  This represents an 18% increase from the second quarter dividend and a 117% increase in dividends from levels in place a year ago.  This most recent dividend increase is the fourth dividend increase approved by the Company in the past 12 months.  AUY has a dividend yield of 1.37% and a dividend growth 5-Year average of 40%.  AUY has an equity summary score of 3.6 out of 10 for a Neutral outlook.

United Technology (UTX) provides technology products and services to the building systems and aerospace industries worldwide. June 13th the company increased its quarterly dividend 11.5% to $0.535 cents per share. The dividend is payable Sept. 10 to shareowners of record at the close of business Aug. 17. The ex-dividend date is Aug. 15.  UTX has a dividend yield of 2.87% and a dividend growth 5-Year average of 15%.  UTX has an equity summary score of 6.9 out of 10 for a Neutral outlook.

Caterpillar (CAT) manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. June 13th the company increased its quarterly dividend 13% to $0.52 per share. The dividend is payable August 20, 2012, to stockholders of record at the close of business, July 20, 2012. CAT has a dividend yield of 2.39% and a dividend growth 5-Year average of 12%.  CAT has an equity summary score of 8.4 out of 10 for a Bullish outlook.

Covered Call Write on Caterpillar (CAT)

Caterpillar (CAT) reported blow-out earnings on October 24. CAT jumped 5.7 percent to $92.39 and led the Dow higher after the heavy equipment maker reported a quarterly profit that topped estimates on record revenues. Excluding the impacts of the recent acquisition of Bucyrus International, profit was $1.93 per share, up 58 percent from a year ago. Sales and revenues excluding Bucyrus were $14.581 billion, up 31 percent from the third quarter of 2010. Excluding the impacts of Bucyrus, it was an all-time record quarter for both sales and revenues and profit.

STRATEGY: Look at the December 2011 92.50 covered call. For each 100 shares of Caterpillar (CAT) stock you buy, sell one December 2011 92.50 covered call option for a $88.85 (92.35 – 3.50) debit or better. That’s potentially a 4.11% assigned return in 25 days or a whopping 60% annualized return.

TECHNICALS: The technicals for CAT are bullish with a possible trend reversal. The stock is under accumulation with support at 80.76. S&P rates this stock 4 STARS (out of five) – buy.

RISK: The stock has to drop 3.8% to threaten the breakeven point.

PROTECTIVE PUT: For those wishing to protect your downside, buy the May 2012 90 put for $10.35. Buy one put for each 100 shares of stock you own. Sell the put when you exit the covered call trade.

S&P RESEARCH NOTES: S&P reiterates buy opinion on shares of Caterpillar (CAT) . Q3 adjusted EPS of $1.93, vs. $1.22, beats our forecast by $0.19. Revenue gain of 41% was above our 36% forecast, on higher demand in almost all products and geographies. Record Q3 sales and profit results were particularly impressive to us in light of economic challenges in developed nations. CAT’s current trends also lead us to expect ongoing demand growth in ’12. We lift our ’11 EPS estimate $0.05 to $7.35, and ’12’s by $0.10 to $9.20. In light of growing economic uncertainties, however, we trim our target price by $13 to $129, on our revised historical P/E analysis.

Performance of Caterpillar (CAT) stock

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