5 Undervalued Dividend Aristocrats to Buy in 2022

3. Caterpillar Inc. (NYSE:CAT)

Number of Hedge Fund Holders: 53

Dividend Yield as of February 25: 2.37%

Number of Years of Consecutive Dividend Increases: 28

P/E Ratio: 15.90

Caterpillar Inc. (NYSE:CAT) manufactures construction and mining equipment, engines, and industrial gas turbines, serving customers worldwide. 

On February 3, Tigress Financial analyst Ivan Feinseth raised the price target on Caterpillar Inc. (NYSE:CAT) to $278 from $270 and kept a Buy rating on the shares. The post-pandemic global recovery is driving increases in commodity prices and construction demand, which in turn is driving construction and mining spending and new trends in capital equipment spending that will further accelerate in 2022 and beyond, the analyst informed investors. 

Caterpillar Inc. (NYSE:CAT) reported its Q4 earnings on January 28, announcing an EPS of $2.69, topping consensus estimates by $0.43. The $13.80 billion revenue was up 22.81% year-over-year, exceeding market predictions by $558.88 million. 

Caterpillar (NYSE:CAT) on January 18 declared a $1.11 per share quarterly dividend, in line with the previous, which was paid on February 18. Caterpillar (NYSE:CAT)’s dividend yield on February 25 was 2.37%. 

The stock is backed by Bill & Melinda Gates Foundation Trust, which held the biggest stake in the company, with 9.6 million shares worth $2 million. Overall, 53 hedge funds were bullish on the stock in the fourth quarter of 2021. 

Here is what Oakmark Funds has to say about Caterpillar Inc. (NYSE:CAT) in its Q2 2021 investor letter:

“Having followed the company closely for north of a decade, Caterpillar is a name we know well. For much of its history, the operating efficiency of the company left much to be desired, but its underlying competitive position was rarely in doubt. A series of actions over the past decade (e.g., LEAN implementation, improved service mix, optimized manufacturing footprint) helped to narrow the gap between Caterpillar’s potential and its realized results, driving material margin expansion and strong share price performance. In our view, the company remains among the highest quality industrials in the market, but its underlying business is cyclical, which can translate to large swings in both performance and investor sentiment over short time periods. Our ability to focus on the long-term, sustainable earnings power of a business (rather than getting distracted by near-term fluctuations) is our most significant edge when investing in cyclical businesses. Due to the inherent volatility in Caterpillar’s end markets and operating performance, we suspect we’ll have a future opportunity to own this high-quality business at a more attractive price once the cycle turns and today’s enthusiasm wears off.”