The US is going through one of the largest construction booms in history — boosting sales of one of the most essential types of construction equipment: excavators.

They’re used to dig, move earth, and lift, and they also make up half of all construction equipment sold in 2022, per Off-Highway (WSJ).

• Labor shortage and a construction boom requiring more workers have raised the demand.
• Construction companies are finding it easier to invest in equipment than to hire.

Last year, North American excavator sales jumped 23% — the second straight year of record sales — and are expected to rise another 5% this year.

Digging for gold

Despite a slowing economy, equipment companies continue to see profits reach new highs — justifying more investment into excavator research and development.

• In recent years, the largest excavator equipment seller Caterpillar (NYSE:CAT) upgraded their excavator lineups — which have become increasingly important to growth.
• In March, Deere (NYSE:DE) also unveiled a new revamped lineup of excavators that could drive sales in the coming years.

And both are producing some heavy-duty numbers. Caterpillar and Deere are trading at a 12.1x and 13.5x forward price-to-earnings multiple, respectively.

Combine their growth and relatively cheap valuations with their 2% and 1.3% dividend yields, and you’ve got a blueprint for steady returns.

Read: Self-driving tractors and a software push could power Deere’s stock higher.