Considering Douglas Dynamics, Garmin In Pursuit Of Meaningful Yield

Includes: GRMN, PLOW
by: Roger Nusbaum

As you know Bespoke Investment Group cranks up and distributes a tremendous amount of data on all sorts of things. One regular part of their rotation is monthly dividend screens - more of a data and information thing. I don't believe this includes a qualitative component but I might be wrong about that.

I spent a lot of time going through the list, looking at companies I don't know because you never know where a new idea can come from. In addition to names on their list, when you plug a new name into Yahoo Finance and/or Google Finance you also find competitors, including some foreign names and again, you never know where a new idea can come from. The other bit of utility here is that sometimes a stock you have an interest in, but lose track of, might pop up for having an unusually high yield. If you decide you believe the yield is sustainable and already know most of the story, then you're not starting from scratch.

I saw one name on there that I knew to have a dividend that could not possibly be sustainable; turns out it has been cut. And from the what the what?-file, Garmin (NASDAQ:GRMN) was on there yielding almost 5%. The P/E is about 10, there's no debt and more than $7 per share in cash, and the dividend is very well covered. When did all that happen? I'm not a buyer of the name despite some good stats, as smart phones have GPSs in them, and I'm pretty sure Garmin is not participating in that or I'd expect the estimates for earnings growth to be more robust. Still, I gave the name a little bit of a once-over and it was worth the time even if I am not a buyer. If someone knows otherwise about GPS devices embedded in smart phones then I would more interested in the name.

There was also a circuit-board maker on there with more than a 5% yield, and another odd one was Douglas Dynamics (NYSE:PLOW), which as you can tell from the symbol makes plow blades and other winter equipment. PLOW yields a little less than 6%. The coverage of the dividend is only decent; it has a little more debt than you might like to see but there is a clear and obvious need for the equipment. The business will be easier to understand for most folks than a circuit board company and in the face of a "bad" winter I would think the stock would go up a lot.

Both Garmin and PLOW could go on to be lousy holds or great holds but the stories and the numbers were very interesting and in looking through the list (it was very long), there were many other interesting names. For an investor willing to use individual stocks there would no doubt be a name or two compelling enough to buy for anyone spending the time.

A couple of weeks ago I wrote an article for about pairing a high yielding stock with an ETF for each sector as a way to capture some meaningful yield, not take single-stock risk throughout the entire portfolio, and still capture plenty of themes and disparate country exposure; don't put all your eggs in one strategy basket. The above offers a pretty good way to do the necessary research for such a concept; the dividend portion anyway.