Hey Ben, What do you think? With Cat sitting on a ton of cash and raking more in every day, will they increase the dividend again this summer? I'm betting on a $0.06 - $0.10 per share increase announcement in July. I'm never too impressed with stock buy back plans that end up eventually just returning the stock to employees via option grants. Most buy back plans seldom result in actually reducing the float. It's just a revolving door. Buy the stock today, grant it back to employees tomorrow. Makes for a nice headline on the front end, but results in no lasting effect on the back. I guess it beats the diluting effect that issuing additional shares to cover the options would have, but from a shareholders perspective I'd prefer they use the cash to pay dividends. That money ends up directly in my pocket and not indirectly by the market valuing the stock higher due to less float. Tax wise it's a push, dividends vs LTCG. I guess the buy back gives the company some flexibility as they can stop it at any time with little publicity but reducing the dividend would be an obvious painful action. I just say give me the money!
Well, we will never agree on buy backs, since you do not think stock is like other things in life; the less there is of anything the more valuable it is, so be it! Yes they will raise div this summer. The stock is fairly priced right now, unlike it was in 2011 when the world turmoil kept it from reaching $140 + a share. I do not care for future sales at this point and expect it to go lower. Mining is usually an approx 7 year cycle and we may have to wait a while before it returns. Unlike you I think Cats business cycle started in 2003 and got interrupted in late 2007 by banking debacle and picked back up in 2010 as soon as banks were bailed out. Other business could keep eps at normal levels but nothing like we have seen in the last couple of years. Latin America should help, but I see personally no growth for oil and other commodities until 2015. This is my assumptions only, and people can take what they want from it. Of course there will be the ones who have been cheated in life and will still spend their time crying and b...hing and blaming everything under the sun, for their life which is completely unrelated to the stock or the company.
Oh I have no problems with buy back plans and their positive effect on valuations. Not sure I agree with your scarcity perspective but if a company is worth $XX billion if there are suddenly half as many shares available each share is worth twice what it was before. Simple math. My problem is companies seldom retain the shares they buy back. They turn around and use the shares to reward senior managers with stock options. Very few stock buy back plans actually end up taking shares off the market for long. If they're returned to the market via stock options grants nothing is accomplished from the shareholders point of view. If they'd use the same cash to give to shareholders as dividends we'd get to keep it.
I agree that the business cycle resumed in 2003 after the 2001 recession and was detoured by the '08 financial crash. But I think it all reset in '10 and started over. I don't think we're eight years into the cycle ('13-'03) - 2 years of recession. I think it reset and started over in '10 so perhaps we're 3 years into the cycle and maybe it got reset again with the European recession and China slow down. So it's hard to say where we are. Regardless I think we're just emerging from a slow down and will see good growth again in the next couple years.