Can CAT Stock Yield 12% Annualized Income While You Wait Out The Slowdown?

Get paid a premium now that’s yours to keep no matter what, in exchange for agreeing to sell your Caterpillar shares at a higher price if they climb there.

Caterpillar (CAT) just delivered a monster quarter, its first ever with sales topping $20 billion, and raised its full-year growth forecast. Yet the stock still trades about 24% below its 52-week high, suggesting the market isn’t quite sure what to do with the heavy-machinery giant. For owners of the stock, that tension creates an opportunity to generate a meaningful income right now, paid upfront, for simply agreeing to sell your shares at a price above today’s level.

12% annualized income on CAT shares you already own, with 16% of upside room, by selling a covered call.

• You own (or buy) 100 shares of CAT near today’s price of $811.29.
• Sell one call option on CAT expiring 9/17/2027, with a strike price of $940, about 16% above today.
• Collect roughly $10,798 in premium up front per contract (each contract covers 100 shares), which you keep no matter what the stock does.
• That premium is about 12.5% annualized on the $81,129 of stock, income you earn just for holding.
• If CAT finishes above $940, your shares are called away at $940. Counting the premium, your total return works out to about 27% annualized, but you give up any gains above the strike.

Two Ways This Plays Out, Both Pay You

If CAT finishes below $940 on 9/17/2027, the call expires worthless, and you keep the full $10,798 premium and all your shares. That is about 13% over 388 days, income earned just for holding, and you are free to sell another call.

If CAT finishes above $940, your 100 shares are called away at $940. You still keep the $10,798 premium, and counting it your total gain works out to about 29% over the holding period (about 27% annualized), a healthy exit. The cost of the trade is that any gain above $940 is no longer yours. And if the stock instead falls, you keep the premium but still ride the shares down: the premium offsets the first 13% of the decline over the holding period and nothing beyond it.

How Much Upside Would You Really Be Giving Up?

Because this trade caps your upside, the decision comes down to how much you think you are leaving on the table. The case for a continued run is straightforward: the company is sitting on a massive $72 billion backlog, with management boosting its outlook for 2026 sales to “mid- to high teens growth.” The Power & Energy segment is seeing such intense demand that some customers are placing orders as far out as 2030. This is the powerful momentum you would be capping.

On the other hand, there are reasons to think the best of the run is behind us. The equally large Construction Industries segment faces a potential slowdown, with management guiding to an inventory-related headwind to. sales volume in the second half of the year. One analyst on the latest earnings call even voiced the market’s “concern on AI and data center demand in the out years,” questioning the staying power of the boom fueling the Power & Energy backlog. We took a closer look at the debate over the company’s future in a separate piece.

For investors in this industrial giant, the question is whether one segment’s strength can outweigh another’s potential softening. If you believe the path higher from here is more of a grind than a sprint, getting paid now to define your exit point could be a strong move. The one thing to watch is the sales volume in Construction Industries; if it holds up better than expected, the bulls have a point, but if it slows, you will have been paid to be patient.

How Much Could The Stocks You Hold Pay You?

You may not own CAT, but you almost certainly own something that could be paying you. Our Covered Call Finder lets you type in a stock, or a few, and instantly see the income a covered call could generate on each, then dial the strike up or down with a slider to balance more income against more upside. It is the quickest way to see what the names in your own portfolio could pay.

One step out from a single name: an industrials ETF like XLI owns the whole industrials group at once, so no single company can sink you. It still rises and falls with that one theme, which is exactly the gap the portfolio below closes.

Where This Income Trade Fits A Bigger Plan

A covered call turns one stock you own into income, but the premium and the downside still come from a single company in a single corner of the market. Durable results come from owning quality across sectors, so that no one name, and no one theme, decides how your year goes.

That is what the Trefis High Quality (HQ) Portfolio is built for: about 30 high-quality businesses spread across sectors, each chosen on the full weight of its fundamentals rather than a single setup, then sized and re-balanced with discipline. It has a track record of outpacing a benchmark that combines the three major indices – the S&P 500, S&P Mid-cap, and Russell 2000. Write calls for income on the names you like, on top of a diversified core that does not lean on any one company or theme.