Harley-Davidson, Inc. Takes Care of Its Fans

Whether you're a hog owner or a HOG shareholder -- or both -- Harley-Davidson has got your back.

Feb 9, 2014 at 8:45PM

Photo: Harley-Davidson.

When Harley-Davidson (NYSE:HOG) announced that it was recalling 29,000 Touring and Softail CVO motorcycles to fix a potential glitch last fall, it did something almost unheard of among automotive companies.

Not only did Harley take it upon itself to warn owners about -- and insist on fixing -- a problem that only "may" (in Harley's own words) pose a safety issue to riders. Not only did Harley tell dealers to not deliver the potentially affected bikes until they'd been inspected. On top of all this, Harley also promised anyone who owned one of the affected bikes that, if they wanted to get it looked at, Harley would personally come to their home, load up the bike on a truck, and haul it to the dealer for inspection.

Talk about good service!

Service with a smile
Clearly, Harley-Davidson cares about its customers. You can see that in how Harley went above and beyond the call of duty to make sure everything was done to fix and address this problem, with the absolute minimum of inconvenience to its customers. And this month, we saw how Harley-Davidson takes care of its shareholders, too.

This year has not been kind to Harley-Davidson shareholders. Indeed, the shares have performed pretty poorly, losing more than 6% of their value against less than a 3% decline in the S&P 500. The fact that Harley shares have outperformed those of rival motorcycle makers Honda (NYSE:HMC) and Polaris (NYSE:PII) probably comes as some consolation. But in absolute terms, the decline must still sting. Fortunately, here again we find Harley riding to the rescue of its fans.

On Wednesday, Harley-Davidson announced plans to return a substantial portion of its cash to long-suffering shareholders. Using a combination of share repurchases (designed to shore up the stock price) and dividend payouts (which reward investors for not selling out, but patiently sticking with the company through a rough patch), Harley aims to return much of its $770 million in annual free cash flow to shareholders over the next few years.

Service that makes you smile
Harley-Davidson's board of directors has authorized the repurchase of 20 million shares of its own stock -- plans that, if implemented in full, would return about $1.3 billion in cash to shareholders. The company has also increased the size of its annual dividend to $1.10 per share -- a 31% increase over past dividends, and enough to give the stock a 1.7% dividend yield.

In effect, the company is saying that if you're not pleased with its stock performance, at least you can count on having Harley pay you a 1.7% profit on your investment every year -- a rate more than three times the interest rate your average bank will pay you.

Whether you're a Hog owner, or a HOG shareholder -- or both -- it's got to be nice to know that Harley-Davidson has got your back.

Consistency is a virtue
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Rich Smith has no position in any stocks mentioned. The Motley Fool recommends Polaris Industries. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.

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