To begin with, Douglas Dynamics Inc (NYSE:PLOW) is the premier name in snowplow and snow and ice control equipment. As the leading name in snowplow market share with brands such as Western, Fisher, and Blizzard, and both fixed and detachable snowplow options for its customers, Douglas Dynamics is going to bring in almost guaranteed cash flow year in and year out.
However, Douglas Dynamics is also doing what it can to expand its product line beyond just winter-based products. With its acquisition of TrynEx for $26 million in May, Douglas acquired a wintertime SnowEx salt spreader, as well as TurfEx, a lawn and sports-turf maintenance seeder and sprayer, and SweepEx for the removal of debris in industrial applications. According to Douglas, the transaction will be cash flow and earnings accretive in fiscal 2014. More importantly, it helps expand Douglas’ revenue stream beyond just the winter months, which will help should another drought-filled year hit again.
Ultimately, though, I think last year’s odd weather serves as potentially the perfect entry point for Douglas Dynamics. If you look back at the past couple of decades of weather history, you’ll see that snow levels are rarely anywhere near as low as they were last year. This means that as weather patterns revert to normal, Douglas will be able to rake in profits at a faster clip that investors or Wall Street analysts are anticipating. Plus, it’ll face some particularly easy quarter-over-quarter comparisons as we head into the upcoming quarters.
Show me the money, Douglas Dynamics
Despite the company’s dominant market share position in snowplows, it’s Douglas Dynamics’ focus on returning cash to shareholders that really has me most impressed – especially considering that it went public only three years ago.
Since initiating a dividend in September 2010, Douglas has raised its quarterly stipend three times, sticking with its promise to reward shareholders even when last year’s weather failed to cooperate. Overall, Douglas has raised its payouts a cumulative total of 13.7% in the past 12 quarters.
Source: Nasdaq.com.
The past two dividend increases have been only a half-cent and a quarter-cent, but it’s the yield that can really add up quickly here for investors. Based on Douglas’ closing price of $14.78 per share on Friday and its forecasted payout of $0.83 going forward, shareholders are going to be raking in a U.S. Treasury bond-thumping 5.7% yield. At this rate, if shareholders were to reinvest their dividends back into Douglas’ stock, they could double their initial investment in less than 13 years! That’s an incredible payback that deserves some recognition.
