The Dow Jones Industrial Average (DJINDICES:^DJI) is the mostwidely followed stock index, and there are no surprises why — after all, the Dow Jones comprises of the 30 largest stocks in the U.S. Although the index considers the largest stocks based on price and not market capitalization, it still offers an excellent starting point for investors to pick top stocks for the long haul, simply because all of the Dow 30 stocks are huge, established players in their respective industries.
Right now, three Dow stocks in particular look really compelling based on recent developments and coming catalysts, and you might want to buy them right away. Read along.
The best Dow stock to play Biden’s infrastructure plan
In an interview with Jim Cramer on CNBC in April, Caterpillar‘s (NYSE:CAT) CEO Jim Umpleby emphasized how an infrastructure bill out of Washington would be “positive for us, no questions.”
On Nov. 15, President Joe Biden silenced critics who’d long blamed the government for all talk, no action on infrastructure by signing a landmark $1.2 trillion bipartisan infrastructure bill into law, less than ten month since starting his tenure as the 46th President of the U.S.
As America now gets down to rebuilding its roads, bridges, rails, airports, ports, upgrade water and internet infrastructure, and expand public infrastructure, heavy-equipment bellwether Caterpillar should stand to benefit. As Caterpillar mentions in its annual report, “the rates of infrastructure spending, commercial construction and housing starts also play a significant role in our results.”
Image source: Getty Images.
While Caterpillar’s construction industries segment is fully focused on the infrastructure sector, its resource industries division also manufactures machinery for heavy construction, mining, quarry and aggregates, and waste handling. Construction industries was Caterpillar’s largest segment in 2019, accounting for almost 40% of total sales. Last year, the segment contributed 37% to sales, one notch below the energy and transportation division given the challenges posed by the COVID-19 pandemic.
Caterpillar is already witnessing solid demand even before federal spending rolls out — its revenue rose 25% year over year in the third quarter, with sales from construction industries and resource industries segments clocking double-digit growth.
Here’s the most important number: Caterpillar ended Q3 with a backlog of $20.6 billion. If my memory serves right, this is the highest backlog I’ve seen since 2011 when Caterpillar ended the full year with a record backlog of around $30 billion.
With Caterpillar increasing dividends for 27 consecutive years and the stock now nearly 17% off 52-week highs with a 2.2% yield, this Dow Dividend Aristocrat stock is a great infrastructure play.
Expect big things coming this titan’s way
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