Bear markets and stock market crashes have historically offered the best purchasing opportunities. Investors are dubious of a company's near-term performance during a decline, therefore some sell equities. Even with sound long-term investment strategies, even the best corporations can see their stock prices fall with the market.
Non-cyclical dividend, cyclical earnings Caterpillar Lee Samaha: This heavy equipment company may seem unusual, but hear me out. The company's revenue and profitability will fluctuate with its primary end markets, but its free cash flow (FCF) will likely pay its dividend.
Caterpillar is a strong "go-to" investment for income-seeking investors during market downturns. Thus, if its stock falls, its dividend yield will climb, and investors can buy it for its sustainable yield. Let's play with numbers to show. It pays about $2.6 billion in dividends. Management expects $5 billion to $10 billion of ME&T FCF during the cycle. To avoid financial arm noise, Caterpillar defines its FCF this manner.
The FCF target range acknowledges that construction, mining, energy, and infrastructure markets affect revenue and earnings. The idea is that $5 billion in FCF will easily cover its $2.6 billion dividend even at the cycle low. The case is made that Caterpillar should increase its dividend more aggressively.
To reduce cyclicality and boost FCF generation, Caterpillar plans to double its less cyclical services sector from $14 billion in 2016 to $28 billion in 2026.
For safe dividends, P&G is royal. Proctor & Gamble's Scott Levine: The S&P 500 has risen steadily in the first half of 2024, but seasoned investors know it can't last. No one wants their assets to lose value, but market crashes are great times to buy strong stocks like Procter & Gamble at a discount.
P&G, a leading consumer staples stock with a 2.4% forward-yielding dividend, has survived market downturns and other challenges for 187 years, making it an ideal choice for investors.
From fabric care to beauty and grooming, P&G has a diverse brand portfolio. While consumers may cut back on streaming subscriptions or eating out less, they're unlikely to quit buying newborn diapers or shampoo and deodorant. P&G is well-positioned to weather revenue and earnings reductions, unlike many other corporations.