Summary
- Autos, if not automakers, will deliver solid profits long into the future.
- Genuine Parts Company is the leading used car and aftermarket parts supplier growing organically and through acquisition.
- It's a bit overvalued relative to the broader market, but the dividend makes up for the difference.
- This idea was discussed in more depth with members of my private investing community, The Technical Investor . Start your free trial today »
I recently highlighted four dividend growth stocks with the auto industry in common. I discovered these stocks while screening the Consumer Discretionary Sector (XLY) for the Technical Investor Portfolio. These stocks are all on the watchlist now because they are insulated from declining sales of new cars, supported by rising sales of used cars, and have attractive dividends. The stock I'm talking about today is my top pick from among this group.
The Investment Thesis
Genuine Parts Company (GPC) has exposure to the auto sector but not so much to the new car industry. It supplies replacement and aftermarket parts for cars and trucks as well as virtually every other type of vehicle in existence. Strength in sales is driven by rapidly expanding global populations and, in the U.S. at least, by a shift to used cars. The company has revenue growth in the forecast and pays an attractive dividend with a high probability of future distribution increases. If you are looking for exposure to consumer strength and dividend growth, Genuine Parts Company is a genuinely good choice.
Genuine Parts Company
Genuine Parts Company distributes automotive replacement, industrial parts and materials, and business products in North America, Australia, New Zealand, the United Kingdom, France, Germany, Poland, and Puerto Rico. The leading brand is Napa, but others in the fold include United Auto Parts and Traction.
Basically, it aggregates and sells parts for just about any industrial need, including automotive, as well as servicing customers with maintenance and repair options. Even if the market for new equipment disintegrates, there will always be a market for replacement parts.
Data from Edmunds and 246Wallst.com show used car markets are heating up and hitting new highs while new cars sales slump. The rising cost of new cars is a primary factor and one that will contribute to continued strength in the after-market and replacement parts business.
