Douglas Dynamics (NYSE:PLOW) shares hit a fresh 52-week high of $46 on Tuesday 27th after the company announced better than expected financial results for the fourth quarter. Additionally, the company continues impressing investors with its strong cash generation potential and higher dividends. Douglas Dynamics has increased its quarterly dividend by 10% to $0.265 per share.

The future fundamentals of Douglas Dynamics appear strong considering the guidance for sales and margins.

The company posted net sales of $138.0 million in the fourth quarter, a growth of 6.0% from $130.1 million in the year-ago period. The mid-single-digit increase in quarterly sales was due to stronger demand for Work Truck Attachments. Consequently, its full-year sales have hit the new record level of $475 million.

Douglas Dynamics operational efficiencies allowed it to turn higher revenue into big profits. Its earnings per share increased $24.4 million to $34.5 million in the fourth quarter, compared to $1.06 per diluted share in the year-ago quarter.

Its CEO Janik said, “We are proud of the tremendous efforts undertaken across our company to address the external challenges we faced in 2017, and believe we entered 2018 in a stronger position because of that hard work.”

The Dividend Growth Appears Safe

Douglas Dynamics continues to generate stronger cash flows to support investments in growth opportunities along with paying higher dividends to investors. The company produced the operating cash flow of $67 million in fiscal 2017, relative to capital expenditure of $8.3 million. Thus the company was left with $59 million in free cash flows when its dividend payments were standing at around $21 million. The huge gap in free cash flows and dividend payments offered room for the dividend increase.

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Moreover, Douglas expects to generate record revenue of $535 million this year, while earnings per share likely to stand in the range of $2.20 per share in 2018. This is because the company appears to be in a position to generate better cash flow and higher dividend in fiscal 2018.

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