Generous Generac Holdings
AnnaLisa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
It's a sultry summer afternoon. The heat is oppressive and hangs heavy in the air but the skies darken and a cool breeze starts to wind around your legs. The stillness is now punctuated by leaves rustling madly. You can feel the charge in the air. A summer storm is a brewing and it looks bad. Power will probably go down. Now, aren't you glad you bought Generac Holdings (NYSE: GNRC) yesterday?
Sounded like the beginning of a Faulkner story or the Worst American Novel but really, Generac Holdings is a go to stock when hurricanes, blizzards and other natural disasters rear their ugly head. Sure, Home Depot(NYSE: HD) is usually the stock touted when major weather events threaten, but Generac Holdings is a powerful little name on its own and more importantly, Generac announced a special dividend of $6 to shareholders as of June 20.
When weather is extreme Generac Holdings offers both commercial and residential generators at affodable price points and are available at Lowe's and Home Depot and many other outlets. While it isn't a powerhouse of exciting merchandise it has been trending higher this year. With good reason, Generac Holdings is a stable Waukesha, Wisconsin business since 1959; it commands a PE of 5.11 (compared to the 19 PE of Home Depot) and has a history of consistent delivery of returns but even better, last earnings conference call surprised on the upside with reported revenue of $294.6 million stunning analysts who expected $250.7 million.
Although the Old Farmer's Almanac predicts a mild hurricane season this year, (who are you to dispute the bride's bible when it comes to planning an outdoor reception months in advance?), in general, there has been a continuing pattern of extreme weather events. According to NOAA, usually 1,000 tornadoes strike the US every year. http://www.ncdc.noaa.gov/oa/climate/severeweather/tornadoes.html
Doomsday preppers aside, I see more people accepting the utility of a generator for the home as they become ever more dependent on their electronics and appliances. Businesses of all sizes (i.e. hospitals, banks, convenience stores, etc.) cannot run efficiently if even a short power loss will be detrimental to their electronic lifeline. Generac Holdings' main competition comes from Honda and Briggs & Stratton which is privately held. Scouring several consumer sites, though, Generac Holdings' products are very highly regarded and competitive.
As the stock is trading in a range of $20-26 recently this $6 special dividend is significant. But I would caution that stocks often sell off after the ex-dividend date to the amount of the special dividend or more, see what happened after the Domino's Pizza Inc (NYSE: DPZ) special dividend of $3 was doled out in early April. If you can hold for a while after the event you may recoup that sell off and more while still enjoying that gift from Generac Holdings. Earnings are going to be reported on July 29. Today it traded up 4% on no news except people might be trying to generate some alpha with that dividend. It had almost doubled from its 52 week low of 15.41 to 30.61 this year.
It has a market cap of only 1.79 billion but it really is one of those steady eddie, Midwestern companies that don't get featured on CNBC or have outrageous management salaries or accounting scandals. It's the kind of company Warren Buffett would have bought in his salad days.. the kind of Great American Company that brings a smile to your face when skies are grey and maybe a rainbow with a pot of gold and some My Little Pony unicorns prancing around your portfolio.. sorry still working on that Worst American Novel. Seriously, Generac Holdings can be a safe haven when the storms of Europe or China hit the market. And don't forget that generous dividend.. you don't have much time left to prep.
leglamp has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend The Home Depot. 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.If you have questions about this post or the Fool’s blog network, click here for information.