Dividend Growth Stock Overview: Polaris Industries Incorporated

Polaris Industries designs and sells off-road vehicles, including the Sportsman ATV.
Photo courtesy Greg Goebel/flickr.com.

About Polaris Industries

Polaris Industries designs and manufactures off-road vehicles, all-terrain vehicles, snowmobiles and motorcycles for distribution around the world. The company also supplies replacement parts for its vehicles in the aftermarket. Polaris is headquartered in Minnesota and was formed in 1994. It is the successor to Polaris Industries Partners L.P., which began manufacturing snowmobiles in 1954.

Polaris divides its business by product lines: Off-Road Vehicles, Snowmobiles, Motorcycles, Small Vehicles, and Parts, Garments & Accessories (PG&A).  About two-thirds of Polaris’ sales come from the Off-Road Vehicles segment, which includes all-terrain vehicles. The Parts, Garments & Accessories segment (which sells products like winches, bumpers, plows, racks, etc.) contribute about 16% of total company sales. The remaining sales are split evenly between Snowmobiles, Motorcycles and Small Vehicles, each of which contribute less than 10% to the company’s total sales.

Polaris has manufacturing facilities in the U. S. in Minnesota, Iowa, Wisconsin, and internationally in Mexico, Poland and France. The company’s products are sold through distributors and independent dealers, and also directly to the military and the government.

In 2014, Polaris Industries had net income from continuing operations of $454.0 million on $4.48 billion. These numbers were increases over the prior year by 19.1% and 18.6%, respectively. Earnings per share were $6.65, up 23.1% from 2013. Using the current dividend of $2.12, this gives the company a current payout ratio of 31.9%. The vast majority (75%) of 2014 Polaris sales were in the United States, and another 10% were in Canada. Because of this, the negative effects of the strong U.S. dollar were small, decreasing total sales volumes calculated in U. S. dollars by less than 2%.

Sales were up in every business segment last year. The largest segment, Off-Road Vehicles, posted a 15.6% increase. PG&A sales were up 21.4% with the completion of the Kolpin and Pro Armor acquisitions in 2014. The acquisition of the Aixam brand played a role in the 28.2% increase in the Small Vehicles segment, as the brand was included in full year earnings for the first time in 2014. Also significantly, the Motorcycles segment was up 58.6% on the strength of the company’s Indian brand motorcycles. Geographically, sales were up 22.7% in the United States and down less than 2% in Canada.

The company has an active share repurchase program. From 1996 – 2014, Polaris repurchased 73.9 million shares. The company just added another 4 million shares to the program, bringing the total of shares remaining on the program to 5.1 million. This represents about 7.7% of the outstanding stock.

The company is a member of the S&P Mid Cap 400 index and trades under the ticker symbol PII.

Polaris Industries’ Dividend and Stock Split History

Polaris Industries Dividend Growth

Polaris Industries has compounded its dividend at over 19% a year for two decades.

Polaris Industries has increased dividends since changing its company structure in 1994. The company announces annual dividend increases at the end of January, with the stock going ex-dividend at the beginning of March. In 2015, Polaris announced a 10.4% dividend increase to an annualized rate of $2.12. I expect Polaris to announce its 21st annual dividend increase in January 2016.

Polaris has built an outstanding dividend growth record. Since 1995, the company has compounded its dividend at over 19% a year. Shorter term, the record is similar, with a 5-year and 10-year compounded dividend growth rate of 21.5% and 14.2%, respectively.

Over the last 23 years, Polaris has split its stock 4 times. Three of them were 2-for-1 splits: August 1993, March 2004 and September 2011. The company also split its stock 3-for-2 in October 1995. A single share of stock purchased before August 1993 would now be 12 shares.

Over the 5 years ending on December 31, 2014, Polaris Industries stock appreciated at an annualized rate of 50.13%, from a split-adjusted $19.69 to $150.18. This dramatically outperformed both the 13.0% annualized return of the S&P 500 index and the 14.9% annualized return of the S&P Mid Cap 400 index over the same period.

Polaris Industries’ Direct Purchase and Dividend Reinvestment Plans

Polaris Industries has both direct purchase and dividend reinvestment plans. You must already be an investor in the company to participate in the plans. If you own shares of Polaris Industries’ stock in your brokerage account, you’ll have to have them transferred into your name in order to join the plans. The minimum amount for additional direct purchases is $25. The dividend reinvestment plan does not allow for partial reinvestment of dividends.

The direct purchase plan is favorable to investors, as Polaris covers the transaction and per share fees for additional purchases, either directly or through the reinvestment of dividends. When you sell your shares, you’ll pay a transaction fee of between $15 and $30, depending on the type of sell order you request, plus a commission of 10 cents per share. You’ll also pay an additional $5 to have the money directly deposited into your account. All fees are deducted from the sales proceeds.

Helpful Links

Polaris Industries’ Investor Relations Website

Current quote and financial summary for Polaris Industries (finviz.com)

Information on the direct purchase and dividend reinvestment plans for Polaris Industries

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