Dividend stocks are everywhere, but many just downright stink. In some cases, the business model is in serious jeopardy, or the dividend itself isn’t sustainable. In others, the dividend is so low, it’s not even worth the paper your dividend check is printed on. A solid dividend strikes the right balance of growth, value, and sustainability.
Today, and one day each week for the rest of the year, we’re going to look at one dividend-paying company that you can put in your portfolio for the long term without too much concern. This isn’t to say that these stocks don’t share the same macro risks that other companies have, but they are a step above your common grade of dividend stock. Check out last week’s selection.
This week, we’ll turn our attention to small-cap winter products supplier Douglas Dynamics Inc (NYSE:PLOW), and I’ll show you how and why this tiny $328.5 million company can pack such a dividend punch for income-seeking investors.
I don’t often highlight very many small caps in a series on great dividends for a number of reasons — most notably because small caps rarely pay a dividend. Steady dividends are often associated with stodgy but stable businesses that have been around for as long as the mind can recall. Most small-cap companies just don’t fit that mold — but Douglas Dynamics Inc (NYSE:PLOW) does!
Source: William Billard, Flickr.
At the mercy of Mother Nature
Unfortunately, just because it fits the mold of a typical dividend stock doesn’t mean its shareholders are exempt from potential downside. As a retailer of snowplows (I’m assuming you guessed that by its ticker symbol, PLOW), sand and salt spreaders, and other snow and ice controls, Douglas Dynamics Inc (NYSE:PLOW) is very much at the mercy of the weather. Last year was particularly tough, with droughts and exceptionally warm weather putting an early end to winter and causing Douglas to report some mind-numbingly bad quarters. If it’s any consolation, though, Douglas Dynamics’ poor results were among good company.
Ski resort Vail Resorts, Inc. (NYSE:MTN) suffered in a big way with less snow on the ground. Vail Resorts, Inc. (NYSE:MTN) turned to boosting season ticket passes as an attempt to recoup some of its losses for the shortened season but still produced only $0.45 in full-year EPS compared with its average full-year EPS in the previous six-years of $1.42.
Snowmobile makers Arctic Cat Inc (NASDAQ:ACAT) and Polaris Industries Inc. (NYSE:PII) also saw their fair share of problems. If not for a new line of snowmobile products, Arctic Cat would have probably seen its fiscal 2013 snowmobile sales dip. Instead, thanks to an incentive-laden lineup, Arctic Cat Inc (NASDAQ:ACAT) was able to grow snowmobile sales by 5%. For Polaris Industries Inc. (NYSE:PII), it saw total sales for fiscal 2012 rise 21% with little help from snowmobile sales, which grew by a measly 1% despite a slew of new snowmobile products. In short, if the weather doesn’t cooperate, you as an investor are going to just be a spectator along for the ride.
The Douglas Dynamics advantage
It might seem counterintuitive to even think about investing in a company whose business is ultimately controlled by the weather, but there are plenty of advantages that Douglas Dynamics Inc (NYSE:PLOW) brings to the table that should have investors forgetting all about 2012.