It's been a remarkable year and a half for Caterpillar Inc. (CAT +2.83%) investors. Shares of the industrial heavyweight are up almost 37% since the beginning of 2016, fueled by hopes of a recovery in the mining and oil and gas industries and a potential infrastructure spending stimulus under Donald Trump's presidency.
Whether the stock can continue to propel higher, however, will depend a great deal on what numbers Caterpillar reports for its first quarter in the coming days. As you await the report, I believe it's a perfect time for to get to know your company better so you can take informed investment decisions and not get carried away by quarterly ups and downs. Read along to know seven such interesting things about Caterpillar.
1. Caterpillar dominates the industry
During its 90 years of existence, Caterpillar has grown to become the leader in nearly every business it operates. Despite a significant drop in sales, Caterpillar remains the world's largest manufacturer of construction and mining equipment, having generated roughly $21 billion in sales from its construction industries and resource industries segments in financial year 2016. For perspective, its closest competitor, Japan-based Komatsu, generated roughly $15 billion (based on an exchange rate of $1 to 108 yen) in construction, mining, and utility sales in fiscal 2016.
Image source: Getty Images
That's not all. Caterpillar also calls itself the world's leading manufacturer of diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives. The company deals in these products through its energy and transportation, or E&T, segment.
2. Its first products were tractors
Caterpillar might be known for its big yellow construction machines, but it started off as a farm-equipment manufacturer. The first Caterpillar tractor, invented by Benjamin Holt, rolled on to the fields in 1904. In 1925, Holt Manufacturing Company merged with its rival, Best Tractor Company, to establish The Caterpillar Tractor Company, with its headquarters in Peoria, Ill.
It was only in 1986 that the company changed its name to Caterpillar Inc., as we know it today, after its portfolio extended beyond tractors to include engines and construction equipment. Caterpillar finally exited the farm-equipment business by selling its Challenger line to ACGO in 2002.
3. Caterpillar has grown by leaps and bounds since 1925
From $13.8 million in sales in 1925, Caterpillar's sales had crossed $55 billion by 2014, when business was at its peak. Back in 1925, Caterpillar served only the agriculture industry, through two U.S. locations. Today, the company's products are available in more than 180 countries, serving 27 industries around the globe through its offices in 20 countries. An integral part of Caterpillar's footprint is its dealerships network, as Caterpillar largely sells through dealers.
4. Its dealership network is a key strength
Caterpillar started operations with only about 80 dealers in 1925. Today, its number of dealers has more than doubled to 172, but its net worth is a staggering $22.7 billion. Clearly, Caterpillar has prioritized unlocking greater value from its existing dealers over blindly bringing more dealers into its fold – a strategy that has ensured tight control over costs while helping the company reach every corner of the globe. Its unparalleled distribution system is one of Caterpillar's biggest competitive strengths today.
5. Its E&T business is bigger than you may think
Do you think Caterpillar gets maximum revenue from its construction or mining-equipment businesses? Here's how E&T has stood out in recent years:
Data source: Caterpillar financials. Chart by author.
One reason is that Caterpillar's E&T segment serves diverse industries, which helps offset weakness in one with strength in another, unlike its other two segments that are focused on the purely cyclical construction and mining industries. Key E&T products include reciprocating engines, generator sets, gas turbines, marine propulsion systems, and locomotives that serve customers in oil and gas, marine, rail, power-generation, and other industries.
6. Guess how much Caterpillar spends in R&D every year
By now, you already have an idea about Caterpillar's size and scale of business. But if you think the company is resting on its laurels or withholding spending among challenging business conditions, hear this: Caterpillar continues to spend roughly $2 billion in research and development every year and owns more than 20,000 patents worldwide today.
Aside from its core businesses, many of Caterpillar's recent investments have been a bet on the future. Examples include an alliance with First Solar to develop integrated photovoltaic solutions for microgrids and investments in big data and drone start-ups. Caterpillar's return on invested capital (ROIC) has averaged 8.5% in the past decade, including a particularly weak 2016, when its ROIC was only about 1%.
7. It hasn't missed a dividend in nearly 90 years
Despite operating in a cyclical industry, Caterpillar has a strong dividend history. Just days ago, management put fears of a dividend cut to rest by maintaining its quarterly dividend at $0.77 per share.
By doing so, Caterpillar might have missed making it to the dividend aristocrat list by a whisker (as of 2015, it had raised its dividends for 23 straight years), but keeping its dividend intact also means the company has paid a dividend every year since it was formed. Yes, you read that right: Caterpillar's dividend history is as old as the company.
