Summary
- Genuine Parts Company is a Dividend King with 63 years straight of raising the dividend.
- The current dividend yield is over 3% and it is well covered or safe based on payout ratio, FCF, and debt ratios.
- The company is expanding globally with a current focus on Europe and Australia.
- Operating and net income margins have had a declining trend for the past several years. Only in 2018 has the decline in net income margin reversed.
- The company would be a decent addition to the most Dividend Growth Investor portfolios at the right price.
Thesis
In my recent article quantitatively screening the Dividend Kings based on my criteria, I identified four stocks that are potentially interesting for Dividend Growth Investors. One of these was Genuine Parts Company (GPC). The company is a long time Dividend King having paid a growing dividend for 63 straight years. Only one company, American States Water (AWR), has paid a growing dividend for a longer period of time. Genuine Parts Company has many characteristics that dividend growth investors prefer including a yield > 3%, reasonable payout ratio, top and bottom line growth over time, decent balance sheet, and a long history of growing dividends. The stock price has traded in a fairly narrow range the past several years and periodically buying opportunities have occurred. But I believe that the stock is fairly valued at the moment but nearing a good entry point.
Source: rchattonfarms.com
Overview of Genuine Parts Company
Genuine Parts Company is a distributor and retailer of automotive parts, industrial and electrical components, and business products. The company is primarily known to most small investors through its ~6,000+ NAPA Auto Parts stores in North America, the GRUPAUTO stores in Europe, and the Repco brand in Australia. The Automotive Parts Group sells replacement parts, heavy duty parts, tools and equipment, accessories, and farm and marine supplies. The Industrial Parts Group offers access to 7.1 million industrial parts and serves over 200,000 MRO and OEM customers. The Electrical Specialties Group distributes over 110,000 items. The Business Products Group distributes over 69,000 items.
In 2018, revenue was a record $18.74B with 56% from the Automotive Parts Group, 34% from the Industrial Parts Group, and 10% from Business Products Group. The Automotive Parts Group operates globally as seen in the chart below with operations in the U.S., France, U.K., Germany, Poland, Canada, Australia, New Zealand, and Mexico. The Industrial Parts Group operates in North America, while the Business Products Group operates in the U.S. and Canada.
