Dividend stocks offer income investors, or anyone, really, the ability to offset market downturns and slowly build wealth through reinvested dividends, and are historically stable and mature businesses. Those are all comforting things, but what investors give up with most dividend stocks is potential for high growth in the stock price -- as the businesses are typically larger and more mature.
In these two cases, however, investors might be able to have their cake and eat it too. That's because Ford Motor Company (F +6.71%) and Polaris (PII +4.07%) have traded 24% and 46% lower over the past three years, compared to the S&P 500's 62% gain, but are poised to rebound in the next couple of years -- and you'll still be banking their high-yield dividends in the meantime.
Turnaround story
You might not have heard of Polaris, unless, of course, you're into powersports, and then it's a household name. Since 1954, Polaris has been manufacturing high-quality, breakthrough products in powersports. It launched the snowmobile industry, reinvented the ATV category, and introduced a wild three-wheel moto-roadster. If you like getting wild and crazy in vehicles, you probably know Polaris, and you probably know they've made a sound business out of it.
With that said, Polaris has taken its fair share of lumps recently, and its top line is likely to decline in 2025. Dealers have been facing weaker consumer demand due to economic uncertainty, tariffs, and inflation, among other factors, and that's caused them to cautiously take on inventory. Polaris is also facing headwinds from poor cost absorption and a negative sales mix -- essentially, higher costs with lower selling points and sometimes promotional discounts.
NYSE: PII
Key Data Points
But don't count the company out in the near term. In fact, during the second quarter, there were certainly silver linings in that revenue topped company expectations, it gained market share, and it achieved its highest second-quarter operating cash flow in over five years. That said, it's very likely that Polaris' earnings-per-share (EPS) won't pass 2024 results for roughly two years.
In my opinion, Polaris boasts competitive advantages with its brand image, history of innovative products, and lean manufacturing, and those things should stick going forward. Profit margins could also improve faster than expected if there's a return to volume growth in the higher-margin and sizable off-road segment. Essentially, Polaris is an excellent company with a foothold in powersports and an economic moat. It also offers investors a juicy dividend yield of 4.5% while you wait for consumer demand to return, enabling the company to utilize its competitive advantages and return to growth.
From zero to hero?
Ford is taking a big leap into the future, which, in the automotive industry, increasingly seems headed toward electric vehicles (EVs). The problem with that is that consumers need a more affordable product now, and with such low volumes and high costs, almost all EVs are unprofitable at the moment. That's especially true for Ford, which lost $5.1 billion from its Model-e division, responsible for its EVs, in 2024.
So, Ford went back to the drawing board, literally. It came up with a way to try to push engineering and manufacturing forward with its new Ford Universal EV Platform and Ford Universal EV Production System.
First, the production system: Ford focused on manufacturing efficiency and transformed its original assembly line into an "assembly tree." The assembly tree will have three sub-assemblies running their lines simultaneously before joining parts together. The upside is that the new process and EV platform are expected to speed up production by 40% compared to the current vehicles produced at its Louisville Assembly Plant. It should be noted that Ford will only realize about a 15% production speed gain as it plans to utilize some of that extra time for other processes.
Image source: Ford Motor Company.
The EV platform is expected to reduce parts by 20% with 25% fewer fasteners and 40% fewer workstations dock-to-dock in the plant. The new EV platform will underpin as many as eight models, beginning with an electric pickup truck in 2027. Here's the kicker: Even with a price tag around $30,000, Ford expects the vehicle to be profitable in the near-term – that's huge news.
If Ford can turn its money-pit Model-e division into a cash printing machine in a couple of years, it will mean significant gains on the bottom line for investors. And while you wait, Ford will pay its lucrative 5.1% dividend yield plus any supplemental dividends Ford dishes out, typically annually.
Time to buy?
While both of these companies operate in cyclical and sometimes unpredictable industries, both have a very well-established business and offer investors high-yielding dividends. In these two cases, however, both also offer upside in the form of a Polaris turnaround and Ford cashing in on its EV business in the years ahead. Now might be a good time to start a small position in these rock-solid dividend stocks.
