Founded in 1837 and headquartered in Moline, Illinois, Deere & Company (DE) is the world’s leading manufacturer of agricultural equipment, explains dividend reinvestment specialist Vita Nelson, editor of DirectInvesting.
The company markets its products primarily through independent retail dealer networks and retail outlets. Its long history of consistent earnings growth and dividend payments makes it a solid company.
It is considered a solid and well-diversified business with a wide economic moat and a sustainable competitive advantage over its rivals that also enjoys outstanding management and corporate culture.
Deere & Co. has paid dividends to investors since 1937, and during the past five years has increased its dividends at an average rate of 6.2%. Its quarterly payment of $0.69 per share currently provides a yield of 3.49%.
A hypothetical investment in Deere & Co. has grown cumulatively (including dividends reinvested) 5,339.31% during the past forty years. The same investment has grown only 2,417.48% in the same period of time, excluding dividends.
The stock exhibits a healthy Dividend Payout Ratio (DPR is the proportion of earnings paid out as dividends to shareholders) of 35.6%, which means the company is paying out 35.6% of all its net income in dividends and is retaining a large percentage of earnings to reinvest or grow the business. Its average DPR during the past five years is 38.0%.
Its Forward P/E ratio of 12.63 is 25.9% below the S&P 500® index forward P/E, and according to Morningstar, the stock is trading 9.7% below its Fair Value Estimate, making it attractive for investors with a long-term investment horizon.
Technically, Deere also looks attractive, trading 17.1% below its 52 weeks high, while it is forming a price consolidation pattern between $175 and $130 approximately, in which $130 is acting as a strong technical support level.
DE’s Beta (a measure of the volatility) is 0.89, so the stock is 11% less volatile than the market. With the stock being fundamental and technically attractive, this company is an appropriate holding for investors who wish to build a holding over the long term.