Genuine Parts Company (GPC) distributes automotive replacement parts, industrial replacement parts, office products, and electrical/electronic materials in the United States, Puerto Rico, the Dominican Republic, Mexico, and Canada. This dividend king has paid dividends since 1948 and has managed to increase them for 58 years in a row.
The company’s latest dividend increase was announced in February 2014 when the Board of Directors approved a 7% increase in the quarterly dividend to 57.50 cents /share. The company’s peer group includes W.W. Grainger (GWW), Autozone (AZO) and Advanced Auto Parts (AAP).
Over the past decade this dividend growth stock has delivered an annualized total return of 14% to its shareholders.
The company has managed to deliver an 8% average increase in annual EPS over the past decade. Genuine Parts Company is expected to earn $4.60 per share in 2014 and $4.93 per share in 2015. In comparison, the company earned $4.40/share in 2013.
Genuine Parts Company does have a record of consistent share repurchases. Between 2004 and 2014, the number of shares decreased from 176 million to 156 million.
Future growth could be driven by acquisitions, expansions in same-store sales and somewhat by adding new locations. The company’s near term prospects should be aided by sales growth, triggered by the expansion in the US economy. It should also be able to leverage its distribution networks to increase sales in acquired companies. Margins should also be higher on cost cutting and higher volumes. Longer term the company could benefit from increased complexity of vehicles and the rising number of automobiles. The company seems to be very conservative in its finances and has a low level of debt coupled with strong cash flow from operations to fund future dividend increases. The industry will force a lot of smaller competitors out, which could result in more opportunities for Genuine Parts Company. Long-term growth will be driven by internal growth and acquisitions.
The annual dividend payment has increased by 6.20% per year over the past decade, which is lower than the growth in EPS.
A 6% growth in distributions translates into the dividend payment doubling every twelve years on average. If we check the dividend history, going as far back as 1983, we could see that Genuine Parts Company has actually managed to double dividends every ten years on average.
The dividend payout ratio has decreased slightly from 53% in 2004 to under 49% by 2013. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.
The return on equity has been on a rise from 16.30% in 2004 to 21.60% in 2013. Rather than focus on absolute values for this indicator, I generally want to see at least a stable return on equity over time.
Currently, the stock is attractively valued, as it trades at a forward P/E of 19 and yields 2.70%. I would consider initiating a position on dips, and subject to availability of funds.
Full Disclosure: None
- Five Dividend Growth Companies Boosting Cash Payouts
- The Dividend Kings List for 2014
- How to invest when the market is at all time highs
- The Dividend Kings List Keeps Expanding
- Dividend Aristocrats List
One way to monitor dividend growth investments is by checking the weekly list of dividend increases. I also find helpful to monitor the an...
As I explained in my article on my dividend retirement plan , I invest in blue chip dividend stocks which can afford increase dividends for...
This is a guest post from Tawcan, who writes about dividend investing and financial independence on his blog at tawcan.com When it comes t...
While I am a buy and hold passive investor, I also try to regularly monitor the companies I own . I usually review the investments I have ma...
Successful investing is simple. You live within your means, save money regularly and invest it. You buy a collection of quality businesses a...
While this site is mostly about dividend investing, the topic today will be more based towards personal finance. This is because I am increa...
This is a guest post written by Todd Wenning, CFA, who is an equity research analyst. Todd is the author of Keeping Your Dividend Edge: Str...
The daily life of dividend growth investor Successful investors buy stock in companies which are within their circle of competence. This c...
PepsiCo, Inc. (NYSE:PEP) manufactures, markets, and sells various foods, snacks, and carbonated and non-carbonated beverages worldwide. The ...
Johnson & Johnson (NYSE:JNJ), together with its subsidiaries, is engaged in the research and development, manufacture, and sale of vario...