The Dow Jones Industrial Average behind the S&P 500 and Nasdaq Composite this year. However, not all Dow equities are down. Caterpillar, IBM, and Microsoft are up over 10% year-to-date. Here's why all three dividend stocks have opportunity to grow.
Lee Samaha (Caterpillar): Customers desire its construction, mining, infrastructure, energy, electricity, and transportation machines. The fourth-quarter earnings report shows that. Its sales volume fell, lowering its earnings by $260 million year over year. A $982 million price rise more than countered this.
Caterpillar achieved a record year with $67.1 billion in sales, $13.7 billion in adjusted operating profit, and $10 billion in machinery, energy, and transportation FCF. Management's projection of FCF across this economic cycle was $5 billion to $10 billion.
However, its 2024 projection is for revenues similar to 2023 and FCF "in the top half" of the range. Caterpillar's earnings may have peaked in the cycle, and Wall Street expects 2024 earnings to be similar to 2023.
Remember that Wall Street has many forecasters who misjudged cyclical company earnings. If interest rates fall in 2024, Caterpillar's construction equipment sales may rise as construction activity rises. Additionally, 2021's $1 trillion infrastructure bill spending is just beginning. Lower interest rates might raise mining and energy prices and make commodity investments more affordable.
If these factors align and Caterpillar's pricing power remains strong, sales volumes and pricing might exceed expectations again in 2024.
IBM offers AI and income investors significant opportunities. IBM's Scott Levine: Nvidia seems to dominate every AI talk these days. It's not the only AI stock. IBM has been developing the Watson platform to increase its AI presence for years.
Big Blue, a Dow stock, offers AI exposure and a good dividend. IBM stock, with its 3.4% forward yield at the present share price, is a wonderful investment for AI investors or passive income seekers.
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