**Global Economic Stimulus Boosts Stocks**
China’s recent stimulus package aimed at reaching a 5% economic growth target for 2024 has sent shockwaves through the global market, sparking a surge in Chinese stock prices and benefiting U.S.-based companies with significant exposure to China. The move comes on the heels of the U.S. Federal Reserve’s 50-basis-point rate cut, designed to combat rising unemployment and alleviate the burden of inflation and soaring housing costs on consumers.
Three dividend stocks, in particular, have seen remarkable gains, with Caterpillar, Albemarle, and Estee Lauder experiencing increases of between 5% and 16% from September 24 to 26. But what drives their growth, and are they worth investing in?
**Caterpillar: A Construction Giant**
Caterpillar, a construction machinery behemoth, has been on a tear, hitting a new intraday all-time high on September 26 and boasting a year-to-date gain of over 40%. The company’s energy and transportation segment, which includes oil and gas, power generation, industrial applications, and transportation, has become a significant revenue driver, outpacing its construction business in 2023. With 54% of its 2023 sales coming from outside the U.S., Caterpillar’s Asia-Pacific region, led by China, contributed a substantial $11.73 billion to its total sales.
The stimulus package is excellent news for Caterpillar, which has faced challenges in its Asia-Pacific business. If the company can sustain its momentum, its stock could remain a good value. However, with analyst estimates predicting slowing growth, Caterpillar’s valuation could become more expensive if earnings growth slows.
**Albemarle: Riding the Lithium Wave**
Albemarle, a prominent lithium miner, has experienced a roller-coaster ride in recent years. After reaching a four-year low in August, the stock has surged over 25% since mid-August, driven by positive news, including a pullback in lithium production from a major Chinese mine, Federal Reserve interest rate cuts, and the China stimulus package.
Despite the volatility, Albemarle remains a significant player in the lithium industry, which is critical for electric vehicle (EV) batteries. The company’s dividend yield stands at 1.7%, and its long-term prospects are tied to the growth of the EV market.
**Estee Lauder: A Beauty Giant**
Estee Lauder, a leading player in the skin care, makeup, fragrance, and hair care categories, has struggled in recent years, particularly in its travel retail business. However, the company’s international presence, with less than 30% of its sales coming from the Americas, makes it an attractive play on the China stimulus package.
Estee Lauder’s stock price surged almost 17% from September 24 to 26, but it still lags behind its all-time high. With a 2.6% dividend yield, the company’s portfolio of brands and ability to adapt its marketing strategy make it an attractive investment opportunity for those who believe in the power of its brand portfolio.
Before investing in these stocks, it’s essential to consider the broader market landscape and the potential risks and opportunities that come with investing in cyclical companies.
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