Caterpillar (CAT) - Get Report is one of Bill Gates' highest-conviction dividend stocks. The company makes up 5% of the Bill and Melinda Gates Foundation's portfolio. It is also the Gates Foundation's highest-yielding stocks, thanks to its 3.8% dividend yield. As of March 31, the foundation held 11.2 million shares of the company, which amounts to an $862 million investment.

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Caterpillar is a tried-and-true dividend stock. Despite operating in a highly cyclical industry, the company has paid a dividend every single year since it was founded in 1925. The company has long been a favorite of The 8 Rules of Dividend Investing because of its stability, shareholder-friendly management, and high dividend yield. 

As a manufacturer of heavy machinery and earth-moving equipment, Caterpillar's success is tied to the health of the global economy. When prices of precious metals and commodities go down, Caterpillar can suffer deep downturns. This is one of those times. Prices for all sorts of commodities, including oil, gas, gold and silver, have declined significantly over the past two years. Caterpillar has been one of the hardest-hit companies from this slump, as its machinery caters primarily to the mining and energy industries.

Caterpillar has struggled with declining revenue and earnings since the peak in commodity prices in 2012. For example, the company generated $5.68 billion of profit on $65.88 billion of revenue in 2012. Revenue and net income have declined each year since then. Last year, revenue and net income clocked in at $47 billion and $2.1 billion, respectively.

If this weren't bad enough, Caterpillar has also been hit by the rally in the dollar. As a major multinational, Caterpillar's results suffer when the dollar is strong, because this makes exports less competitive across the world, and it also makes internationally generated revenue translate into fewer greenbacks.

Approximately 59% of Caterpillar's revenue last year came from outside the U.S. Not surprisingly, Caterpillar had a rough year in 2015. Earnings per share declined 28%. Revenue fell 19% in the Energy & Transportation business and 15% in the Resource Industries segment, which are the businesses most exposed to mining and commodities.

Unfortunately, conditions have not improved much to start 2016. Earnings per share have declined 58% over the first half of the year, compared with the same period last year. And, the outlook for the rest of the year is cloudy at best.

Caterpillar management stated in last quarter's earnings report that the industries and markets it serves are not likely to improve this year, due to subdued economic growth across the world. It could be that the recent Brexit vote has caused global uncertainty to rear its ugly head once again. As such, Caterpillar expects 2016 revenue to be down approximately 15% from last year, and earnings per share are projected to decline another 21%.

With all of the negativity surrounding Caterpillar, you might be wondering what Bill Gates is thinking. As a short-term investment, Caterpillar does not stand out. The company likely will generate strong returns for investors willing to invest for the long run, however.

It is important to note that Caterpillar has achieved consistent profitability throughout the current commodity price cycle. This has helped the company maintain its dividend at a time when many other cyclical stocks have cut or suspended dividends due to commodity exposure. This is important because it means the company is adept at cutting costs and remaining profitable when times are tough, yet continuing to reward investors for their patience.

Investors are looking ahead to when the global mining and energy markets will improve, and there could be promising signs of a recovery.

A large part of Caterpillar's dour forecast this year is because of a restructuring charge, as the company has cut costs by reducing headcount. Restructuring costs are expected to come in at $700 million this year, up from previous guidance of $550 million. Excluding the restructuring charge, which is expected to shave 80 cents per share off the company's full-year EPS, Caterpillar expects to earn $3.55 per share in 2016. This would actually represent a 1% increase from last year, and might indicate a recovery is underway.

Furthermore, returning to earnings growth will meaningfully protect Caterpillar's annual dividend of $3.08 per share. If things go according to plan, Caterpillar is on pace to cover its 2016 dividend with earnings. A payout ratio less than 100% is a promising sign that the dividend can be maintained going forward.

Caterpillar's current dividend amounts to a hefty 3.8% dividend yield. This is significantly higher than the average yield in the S&P 500 index, which is only about 2%.

Caterpillar has a long track record of surviving the ups and downs of a cyclical industry before, and it has a very good chance of doing so again this time. Caterpillar is an excellent example of a high-quality, high-yielding blue- chip stock.

When commodity prices do recover -- and they will eventually due to their fluctuating nature -- Caterpillar shares will very likely significantly outperform the market.

Caterpillar set its all-time revenue high of $65.88 billion in 2012. Higher commodity prices not only lead to more revenue, they lead to higher margins. Caterpillar's margins in 2012 were 9.5%. The company had EPS of $9.36 in 2012 and traded for an average price-to-earnings ratio of 10. What will happen next time commodity prices are at the peak of their cycle?

We expect Caterpillar to generate revenue and profit margins at leastin line with 2012. The company has become more efficient since that time, so there's a good chance margins will be higher than 2012 during the next peak commodity wave.

Caterpillar has also reduced its share count by 11% since 2012. Because of these factors, we expect earnings-per-share for Caterpillar during the peak of the commodity cycle of around $10.50 per share, with a price-to-earnings ratio of 10. This translates into a share price of $105. That's 29% upside from current prices. Investors will benefit from Caterpillar's high 3.8% dividend yield while waiting for a commodity price recovery.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.