So in my first post about agriculture I talked about Chemical and manufacturing companies in North America. Now I would like to talk about the big dogs, the main drivers behind the $3 Trillion global industry. The machinery side of it all. I want to talk about 3 of the biggest and 1 I feel is an underdog(I use that term lightly because of how big the other 3 companies are). The crazy thing though about these 3 companies is how diversified they are and how big of a brand they are on a world stage.
Now I know what you are thinking, Who are these companies? Well buckle up, because they have some pretty old history and chances are you have heard of all of them. Firstly my favorite of these 4 companies is Caterpillar(CAT). Not only are they older than the dirt that they move, they also have the biggest market cap of the 4. Next is one that has had a song named after it, Deere & Company(DE). Not only that, but chances are you have seen their massive green tractors in a field once or twice or one of their pieces of equipment on a construction site. Thirdly is Cummins(CMI), they literally can make an engine for pretty much anything you could possibly need or want. Lastly is my underdog who isn’t really an underdog, Toromont Industries Ltd(TIH). Do you have heavy or need heavy equipment(specifically Caterpillar)? Cause their whole purpose is to provide the equipment to you and maintain it for you.
These companies are particularly special since they are not just limited to the agriculture sector. In fact agriculture is just a part of what they do. Most of these companies are also the biggest players in the construction sector, mining sector, oil and gas sector and not to mention power generation through gensets. But its this diversity that all of these companies have with the ability to grow and be as big as they are. Each one of these companies are a powerhouse across the world and provide investors with great growth, dividends and diversity for your portfolio. Now lets take a look at these companies and what makes them all such good investments.
First I would like to talk about Caterpillar(CAT). They are the biggest per market cap of these 4 companies and and its the world’s largest construction equipment manufacturer. They originally started out from a merger of 2 companies in 1925 to create the Caterpillar Tractor Company. Although they don’t deal exclusively with Tractors they make all different types of equipment for the industry including skid steers, front end loaders, excavators, utility vehicles and backhoes. These are all integral parts of every farmers needs. Do you think that with this list of just a few things they deal with that having them as a world wide player in this industry would be a good investment? I think so. All of their numbers are way to good to pass them over from their EPS to their dividend yield(i know, its not 5% but thats ok haha). In 2019 They did $53.8 Billion in sales which is huge, but I do feel along with everyone else they 2020 will be lower. I am definately keeping my eyes on them especially with their earnings coming out Friday July 31, 2020.
Caterpillar(CAT)-$138.03USD/Share, $74.76 Billion Market Cap, 9.43 EPS, 14.8 P/E(current), Dividend Yield of 2.94%($4.12/share) and a Dividend Payout Ratio of 37%(12 month trailing).
Next I would like to talk about arguably the most iconic of the agriculture companies, Deere & Company(DE) formerly John Deere. They were founded in 1837. This company has literally been around longer than Canada has been a country. Deere & Company has such a wider variety of agriculture equipment such as Tractors, Combines, Field Sprayers, Utility vehicles and all the fun attachments that go with all of this equipment. They are in fact the largest agriculture machinery machinery company in the world and have over 67,000 employees around the world(mainly the US and Canada). Much like Caterpillar though they are not limited to just agriculture but also diversify into construction and forestry. In 2019 they had sales of $39.2 Billion which is roughly up $2 Billion from 2018. I feel that 2020 might not be a very strong year for them but we could very well be surprised. Here is a look at their up to date numbers.
Deere & Company(DE)-$175.79USD/Share, $55.16 Billion Market Cap, 8.61 EPS, 20.5 P/E(current), Dividend Yield of 1.72%($3.04/share) and a Dividend Payout Ratio of 30%(12 month trailing).
The third company I would like to talk about is Cummins(CMI). Now Cummins is a very special company because they specifically make engines. But the thing is, they literally make engines for everything. They currently make engines for combine harvesters, Tractors, Sprayers and autonomous equipment. Their main target though in the agriculture side of business is Sprayers. They have even built the engine that goes in the worlds first autonomous orchard sprayer named GUSS(Global Unmanned Spray System). Cummins is a huge business that is currently in 190 countries and territories who has about 59,000 employees. Their Sales in 2019 was about $23.6 Billion which is roughly the same as what they did in 2018. We will just have to wait and see what they will do in 2020.
Cummins(CMI)-$195.02USD/Share, $28.17 Billion Market Cap, 13.63 EPS, 14.0 P/E(current), Dividend Yield of 2.79%($5.24/share) and a Dividend Payout Ratio of 34.8%(12 months trailing).
The last company I would like to talk about it Toromont Industries LTD(TIH). I feel that they are somewhat of a very diverse part of this group of companies and probably an underdog in the industry. They are a dedicated supplier or new and used equipment as well as provide servicing for the new and used equipment. They do all their agricultural sales through AGwest which is an agricultural equipment dearship in Manitoba(lots of farmers there) and are official of the brands AGCO and CLAAS. Although AgWest is a small part of Toromont many of their own other dealerships provide Caterpillar equipment to the agricultural sector as well. They are only in Canada and go from Manitoba all the way to the east coast. Not only do they make alot of money on sales of new/used and rentals($1.9 Billion in 2019) they also make a huge amount on product support($1.4 Billion in 2019). Both of those numbers were about about $100 Million from 2018. Seeing that kind of growth along with the increase of growth in the years previous makes them a very nice growth company with minimal competition.
Toromont Industries LTD(TIH)-$73.43CAD/Share, $6.0 Billion Market Cap, 3.46 EPS, 21.1 P/E(current), Dividend Yield of 1.70%($1.24/share) and a Dividend Payout Ratio of 32%(12 months trailing).
These companies already have the advantage of being a big player in other industries so why not get the full force of diversification with any of these 4? They all have very strong numbers and show promising growth. The only things holding them back is the global pandemic and even then I doubt it will hold them back much. All 4 of these companies have already recovered back to where they were before the pandemic hit which shows their resilience and strength. Not to mention they all pay a pretty decent dividend and not a single one pays out over 40% which to me shows they are smart with their money and wont be over extending themselves. All in all I am keeping an eye on all of these companies and look forward to their earnings coming up.
That is all for today and remember everyone, invest in yourself first.
Disclaimer* All share prices are aftermarket close today July 28, 2020