The high-flying maker of plesurecraft including jetskis and snowmobiles, BRP Inc. (TSX:DOO) has seen its stock recently come under pressure as investors consider the potential impact a downturn in the economy, particularly in the United States, would have on the Canadian manufacturer.
As with many other highly discretionary items, when the good times roll, profits come in - the flip side is where long-term investors get antsy.
The company has reported relatively strong earnings numbers of late, announcing a large buyback of up to $300 million of the company's stock, and has diversified its product lines somewhat to attract different segments of the market than the company's traditional base.
That said, tariff concerns from China and other macroeconomic headwinds stand in the face of what appear to be strong earnings numbers for investors concerned about a longer time horizon than the next 12 months.
I count myself among the bearish crowd when it comes to portfolio allocation at this point in the cycle, and have steered clear of companies like BRP for this reason alone.
The company's meager dividend of only 0.8% simply does not compensate investors for the heightened level of risk one would take with an investment in BRP, as this is one of the key metrics I factor into decision making with companies like BRP.
For investors seeking income or security, this company may be too risky at this point in time. For those looking for growth, however, the story is compelling. Trade with care.
Invest wisely, my friends.
