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Dividend investors have come to count on regular increases from stocks that have tended to treat them well in the past, and Polaris Industries (NYSE: PII) has put together an impressive track record of success on the dividend front. For 21 straight years, Polaris has rewarded dividend investors with an increase in their quarterly payout each and every year. Yet over the past year, the maker of motorcycles and all-terrain vehicles has seen its stock price take a huge hit, losing more than a third of its value, even after rebounding from more severe losses.
Given the company's challenges, some wonder if 2017 could bring a break in Polaris' dividend-increase streak. Let's look more closely at Polaris Industries to see whether investors should be worried about its dividend future.
Dividend stats on Polaris Industries
Source: Yahoo! Finance. Last change refers to ex-dividend date.
Will Polaris keep sending its dividends northward?
Polaris hasn't just been a good steward of shareholder capital by paying healthy dividends. It has also produced strong long-term returns for investors, posting an average annual return of almost 17% over the past 20 years.
In order to generate those dividend increases, Polaris has moved forward on multiple growth fronts. On one hand, the company has continued to develop its namesake brand of ATVs and snowmobiles. Yet the company also hasn't hesitated to make smart strategic moves, and in particular, its 2011 purchase of Indian Motorcycles helped flesh out Polaris' exposure to the on-road segment of the industry, adding to its existing Victory brand and helping to capture a somewhat different demographic for the company.
The extent of Polaris' success has helped the company accelerate its dividend growth. Throughout much of the 2000s, Polaris was content to increase its dividends by low double-digit percentages. But in 2012, Polaris gave shareholders a huge 64% boost, and subsequent years still brought increases in the 10% to 14% range that added to its overall growth.
Yet Polaris has run into challenges over the past year, and that prompted the company to get more defensive about its dividend growth. Earlier this year, Polaris gave shareholders their typical increase, but at less than 4%, investors understood that things had changed for the vehicle maker.
Among the problems that the company faced were multiple recalls of various Polaris products, falling retail sales and net income, and concerns about the overall economic climate and its potential impact on future sales. In particular, signs from competitors that the motorcycle market might start to cool led Polaris to reduce its full-year guidance on sales for the segment, albeit still at an impressive double-digit percentage pace.
Can Polaris dividends keep rising?
One thing to keep in mind about Polaris' most recent dividend increase is that it came at the same time as a major stock repurchase authorization. The company approved an increase of 7.5 million shares to its buyback program, and CEO Scott Wine said that he believes that "increasing our buyback activity currently is an excellent use of Polaris' strong cash flow."
As Polaris approaches the 25-year streak necessary to become a Dividend Aristocrat, investors should take for granted the idea that the company will make at least token dividend increases. The company's current payout ratio is less than two-fifths of the money it's earning, and so Polaris can afford to weather slowdowns without worrying about paying too much on dividends.
Polaris shareholders can expect a dividend increase in 2017, and it's likely to come early in the year. The size of the boost might not match what shareholders would like to see, but it will still speak to Polaris' ability to get through tough times and treat investors well along the way.
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Dan Caplinger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Polaris Industries. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.