Why Income Investors Should Have Harley-Davidson, Inc. (NYSE:HOG) In Their Portfolio

If you are an income investor, then Harley-Davidson, Inc. (NYSE:HOG) should be on your radar. Harley-Davidson, Inc. primarily manufactures and sells cruiser and touring motorcycles. Over the past 10 years, the US$5.6b market cap company has been growing its dividend payments, from $1.32 to $1.48. Currently yielding 4.3%, let’s take a closer look at Harley-Davidson’s dividend profile.

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What Is A Dividend Rock Star?

It is a stock that pays a reliable and steady dividend over the past decade, at a rate that is competitive relative to the other dividend-paying companies on the market. More specifically:

  • It is paying an annual yield above 75% of dividend payers
  • It consistently pays out dividend without missing a payment or significantly cutting payout
  • Its has increased its dividend per share amount over the past
  • It can afford to pay the current rate of dividends from its earnings
  • It has the ability to keep paying its dividends going forward

High Yield And Dependable

Harley-Davidson currently yields 4.3%, which is high for Auto stocks. But the real reason Harley-Davidson stands out is because it has a high chance of being able to continue to pay dividend at this level for years to come, something that is quite desirable if you are looking to create a portfolio that generates a steady stream of income.

NYSE:HOG Historical Dividend Yield January 30th 19
NYSE:HOG Historical Dividend Yield January 30th 19

Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. In the case of HOG it has increased its DPS from $1.32 to $1.48 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. These are all positive signs of a great, reliable dividend stock.

Harley-Davidson has a trailing twelve-month payout ratio of 46%, which means that the dividend is covered by earnings. Going forward, analysts expect HOG’s payout to remain around the same level at 45% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 4.6%. Furthermore, EPS should increase to $3.47.

When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.

Next Steps:

Harley-Davidson’s strong dividend attributes make it, without a doubt, a stock dividend investors should be considering for their portfolios. However, given this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three fundamental aspects you should further research:

  1. Future Outlook: What are well-informed industry analysts predicting for HOG’s future growth? Take a look at our free research report of analyst consensus for HOG’s outlook.
  2. Valuation: What is HOG worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether HOG is currently mispriced by the market.
  3. Other Dividend Rockstars: Are there strong dividend payers with better fundamentals out there? Check out our free list of these great stocks here.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.