Careful, I think they said they expected revenues to be down 5%. Depending on their cost reduction efforts earning could be down significantly more. It's probably a good time to be accumulating for the next leg up, but it will require some time and patience. I'm thinking 2016 and that's an election year so there is additional uncertainty with that as well. Maybe Toothy is right, we're all doomed. :-)
Caterpillar profits are still at record highs compared to the previous 10 years. Sometimes companies can cut to deep to try to keep investors investing. But if they lose too much blood, then even when the hemorrhaging stops, they become too weak to answer the call to ramp up, and can’t meet demand. Caterpillar was strong, and has always paid dividends and as teckie09 stated revenue drop won’t adversely affect profits, they will still be in the top 10 years. For that reason alone it is a good company to invest in and hold. But the actions they are taking, with all of their lay-offs in order make immediate higher profits, hurt the company and the economy long term. I can’t support that by investing in their stock. We need smart investors who invest in the company and the country, long term. I see another bubble coming thanks to people looking for the quick buck.
Knowing the company and what they are currently doing at the plants, a 5% revenue drop still may not adversely affect profits. Having said that, our government and administration can cause a further downward movement of revenue beyond the 5%.
Many investors point to the dividend as a rationale for buying the stock here.
While dividends play a critical role in generating long term returns, they alone rarely provide the typical required rate of return (for equities generally 7-9%). A high dividend stock can still be above intrinsic value, and when one buys at that level, they will generate mediocre long run returns. The dividend argument could have been made two years ago in CAT when the stock was trading at $95 just as well as it is made today. Since then, the stock has been nothing but dead money while the S&P 500 rallied 40%. Investors would have been wise to recognize that despite its dividend, CAT was trading beyond fundamental merits and moved into another stock that was trading at a discount to fair value. Dividends alone do not guarantee acceptable returns, especially when you purchase over-priced stocks.