Deere & Company (DE) was founded in 1837 and has not reduced its dividend payments since 1987. The company sells agricultural, construction, and forestry equipment globally under the John Deere name. The company is a member of the Dividend Achievers Index, a select group of stocks that have increased their dividend payments for 10 or more consecutive years.
Business Overview
Deere & Company operates in three primary segments: Agriculture & Turf, Construction & Forestry, and Financial Services. The Agriculture & Turf segment is by far the company's largest. Operating profit generated through the company's full fiscal 2014 is shown below to demonstrate the relative value of each segment to the company:
The Agriculture & Turf segment is responsible for the majority of Deere & Company's operating income. The segment manufactures and sells agriculture and farming equipment around the world. The segment is highly cyclical, and largely dependent upon agricultural commodity prices. Low agricultural commodity prices mean less money for farmers who in turn purchase less machinery.
The Construction & Forestry segment is Deere & Company's smallest segment based on operating income. Like the Agriculture & Turf segment, the Construction & Forestry segment is highly cyclical. The segment's profits are correlated with the general housing and construction industry, especially in the US.
The Financial Services segment provides leasing and financing services for John Deere retailers. The segment has grown to become the company's second largest, and is now responsible for 18% of total income.
Competitive Advantage & Growth Prospects
Deere & Company is the second largest publicly traded corporation in the Construction Machinery industry, behind only Caterpillar (CAT). For comparison, Deere & Company has a market cap of $31 billion while Caterpillar has a market cap of $54 billion. As the second largest player in the global construction machinery equipment industry, Deere & Company has a scale advantage over smaller competitors.
