Paccar: Looking At Dividends For The Long Haul

Feb.12.12 | About: PACCAR Inc. (PCAR)

One of the first things that the typical income-seeking investor looks at when evaluating a potential purchase is the current yield of a given stock. While that makes sense, such a practice may cause the investor to miss out on a potentially profitable position in one's portfolio.

One such company is PACCAR, Inc. (NASDAQ:PCAR), the company that manufactures Peterbilt, Kenworth, and DAF trucks. The Peterbilt and Kenworth brands are primarily sold in North American markets, while DAF is well-regarded in Europe, as well as other markets, such as Australia and Africa.

It can be argued that PCAR is not truly a manufacturer, since roughly 90% of North American and 45% of European production comes from the assembling of out-sourced components, making it easier for the firm to suffer unduly during cyclical downturns. Having said that, they did announce on 1-10-12 that the firm started construction of a factory in Brazil for their DAF marque.

Getting back to the dividend side of things, PCAR currently sports a yield of 1.7%, hardly anything to make a dividend investor's mouth water. The $.18 that's currently paid quarterly isn't the whole story, however, because PCAR traditionally pays an annual "special dividend" at year end that makes a notable change in the yield picture.

Going back through past financial statements, PCAR paid dividends annually as follows:

Regular dividend/Special dividend

  • 2004: $0.75/ $2.00
  • 2005: $0.87/ $2.00
  • 2006: $0.77/ $2.00*
  • 2007: $0.65/ $1.00
  • 2008: $0.72/ $0.10
  • 2009: $0.54/ -0-
  • 2010: $0.39/ $0.30
  • 2011: $0.72/ $0.70

*The stock split 3/2 in August, 2006, so numbers are not directly comparable.

It seems quite evident to me that the firm's management isn't stingy in sharing with shareholders when conditions allow it to do without adversely effecting financial stability. Despite the fact that the firm's in a cyclical industry, I find it noteworthy that the firm continued to pay dividends in 2008 and 2009.

In addition to the dividends, the company actively buys back shares on a regular basis. On 12-08-11, the company announced an additional $300 million share repurchase. Total share repurchases for 2011 amounted to 8.4 million.

PCAR closed at $43.27 on Friday, just a bit above the middle of it's 52 week range of $31.57-$54.58. At that price, PCAR trades at a forward PE of 10.9 and a P/B of 2.7.

From a technical perspective, stochastics show it approaching oversold territory (a reading of 26.55, with 20 being the "oversold" marker), with a 200 dma of $42.62, and the 50 dma at $40.91, and rising.

Despite the sometimes uneven dividend, which is an anathema to some dividend investors, I feel that a judicious purchase of PCAR would constitute a worthwhile addition to a dividend portfolio.

Sources:

  • Company website
  • Morningstar
  • Yahoo Finance

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in PCAR over the next 72 hours.