Snow removal is not a business I think of often, especially not this year in New York with temperatures well above what we expect in December, not to mention all the chatter about global warming. But with shares Douglas Dynamics ($PLOW) – take a hint from the ticker – with a nearly 4% yield, show up in my Smart Alpha Equity Income model, perhaps it’s time for me to take a closer look.

Yes, it’s hard to predict – but not impossible

For those who haven’t solved the riddle of the ticker, the company is a major producer of snow- and ice-control equipment.

The main reason why I reflexively tend to cringe when I see businesses like this is that I hate being involved in stocks whose fortunes seem to depend on things that are completely unpredictable. The level of annual snowfall seems to qualify in that regard. But on closer examination, it’s really not that intimidating.

It is true that annual snowfall varies a lot from year to year. But Figure 1, from $PLOW’s 2014 10-K, shows that when viewed on a longer-term basis, ten-year rolling averages in this instance, it’s actually been quite steady.

Figure 1

 The stability of the 10-year rolling snowfall average would be no consolation if the company is covering its dividend by the skin of its teeth. Table 1 shows, however, that it generates more than enough cash to cover both its dividend needs and its capital spending.

Table 1

There is a relationship between the amount of snowfall and what the company earns with higher levels leading to higher purchases and increasing wear and tear (which boosts demand for the company’s smaller but higher-margin spare parts business), but it’s not so tight as to suggest that an unusually warm winter would put the current payout in jeopardy.