GPC Stock Dividend Review & Analysis: Genuine Parts-Dividends Diversify

Let’s dig into a GPC stock analysis and GPC stock dividend review today. Why?

Because the last time I checked, there were a lot of cars on the road. And, the average age of those cars is increasing.

So, lots of older cars on the road mean the company has a steady and growing demand for their services and products. And, auto parts are what the Genuine Parts Company provides.

GPC Stock Analysis & Dividend Review

Let’s test drive the GPC stock dividend using my dividend stock analysis process. Certainly, I will have some thoughts on Genuine Parts dividend safety, growth, dividend yield, GPC stock valuation, and much more!

Let’s begin by reviewing the Genuine Parts business model. After all, it’s the engine that feeds our GPC stock dividend.

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Genuine Parts Company Background

Genuine Parts Company was founded in 1928. They are a service organization.

The company distributes automotive replacement parts and industrial replacement parts.

Source: Genuine Parts – About

GPC Stock Symbol

The common stock of Genuine Parts Company trades on the New York Stock Exchange under the ticker symbol GPC (NYSE: GPC).

Genuine Parts Business Groups

The company is organized around 2 primary business groups.

First of all, the Automotive Parts Group is the largest.

They keep engines running by distributing automotive replacement parts, accessory items, and service items. Service territories include North America, some areas of Europe, Australia, and New Zealand.

In North America, they sell under their well known NAPA brand name.

The second business, the Industrial Parts Group, operates under the name Motion Industries.

Motion’s focus is serving industrial business needs by selling more than 7.1 million replacement parts and materials. They serve customers in all types of industries throughout North America.

In the past, GPC operated a 3rd business. It was their Business Products Group operating under the name S.P. Richards Company.

The business products unit was sold in 2020. To better streamline GPC operations.

Now, under new management, the business provides logistics and distribution of more than 98,000 office products to over 9,700 re-sellers and distributors throughout the United States and Canada.

Each business group’s percentage share of annual net sales is shown in the chart below.

Chart 1: GPC Revenue By Business Group

Let’s move on with our Genuine Parts stock analysis and dividend review. We will do so by covering all of the facts and figures about the GPC stock dividend.

For me, this is the important part when it comes to managing cash flow from my dividends.

GPC Stock Dividend Rate Per Share

The annual GPC stock dividend is currently $3.16 cents per share on a forward basis.

GPC Dividend Yield

This gives us a 3.1% GPC stock dividend yield at Genuine Part’s recent stock price. GPC’s dividend is right in my sweet spot between 3% and 5%.

Higher dividend yields are nice. Especially when you have a strong focus on making money from dividends.

But with GPC’s moderate dividend yield, we are getting our first indication of dividend safety. We will get into GPC dividend safety a little later.

But now, more GPC dividend facts and information to come.

How Often Does GPC Pay Dividends?

GPC pays dividends every 3 months or 4 times per year. Each quarterly dividend payment is 79 cents per share.

In Which Months Are GPC’s Dividends Paid?

As a shareholder, you will receive dividend payments from GPC in the same months each year. Those months are January, April, July, and October. GPC dividends are typically paid on the first business day of these months.

GPC Ex-Dividend Date

Do you want to receive the next GPC dividend payment? Then, as a new shareholder, you must complete your purchase by the ex-dividend date.

GPC’s ex-dividend date falls in the month PRIOR to when the company pays dividends. And it falls early in the month. Almost always during the first week.

The ex-dividend date is slightly different each quarter. So, it’s best to check GPC’s dividend news and information on its investor relations website. You can get the exact date for each dividend payment there.

On the other hand, once you invest in GPC there is nothing more to do. You will receive future dividend payments whenever they are approved by the company’s board of directors and paid by GPC.

GPC Stock Dividend History

From my perspective, GPC is one of those great dividend stocks that seem to go unnoticed. It just doesn’t seem to have much “buzz”.

I’m not sure why? I mean, GPC’s dividend history is nothing short of elite.

Genuine Parts Is A Dividend King!

What really stands out is that the Genuine Parts dividend has been increased for 64 consecutive years. That is truly a remarkable dividend increase streak. It is one of the longest on record.

As far as I know, there are only 2 companies with longer annual dividend increase records. They are American States Water and Dover Corporation. Their records only exceed GPCs by 1 and 2 years, respectively.

64 years makes Genuine Parts a Dividend King. That is what companies who have increased dividends annually for at least 50 years in a row are known as. They are called Dividend Kings!

There are only about 30 of these rare and special companies in existence. Are you interested in other Dividend Kings?

Then, consider stocks like:

Now, long records of annual dividend increases are great. But what about the GPC dividend growth rate. Let’s look at that next.

GPC Dividend Growth Rate

As shown in the table below, GPC is a stock that has consistent dividend growth during the past 7 years.

Table 1: GPC Compound Annual Dividend Growth Rate

1 Year	3 Years	5 Years	7 Years
5.9%	5.1%	5.8%	6.4%

And it should come as no surprise that the company increased its dividend again this year. The latest dividend increase was a little on the low side. It was just 3.6%.

GPC Stock Dividend Policy

GPC, a company with a rich history of paying dividends, also doesn’t disappoint when it comes to dividend policy. I like it when a company communicates clear intentions for its dividend.

In a recent investor presentation, Genuine Parts management makes an important point about dividend policy:

“Targeted payout range of 50% to 55%.”

We will see how this holds up when we look at the GPC dividend payout ratios. And, it will help with my dividend growth forecast. As I said, I appreciate a company that is transparent about the future of its dividend.

We will get to those areas shortly. But first, let’s look at some of the business fundamentals and financial reporting information.

Genuine Parts Revenue Trend

As shown in the chart below, the company’s revenue has grown consistently during recent years.

Chart 2: GPC 7-Year Annual Revenue Trend

First of all, revenue growth accelerated in 2018 as a result of Genuine Part’s acquisition of Alliance Automotive Group. Alliance Automotive is a leading European distributor of vehicle parts, tools, and workshop equipment.

Furthermore, the company’s long-term revenue gains are supported by strategic acquisitions, market share gains, and overall economic growth.

Finally, GPC’s long-term annual goal is to improve sales by 6-8%.

GPC Dividend Payout Ratio Based On Earnings

Earnings per share have been choppy over the past 7 years. Mainly due to accounting adjustments and 1-time charges.

Chart 3: GPC 7 Year History Of Dividends and Earnings Per Share

Genuine Parts dividend payout ratio base on earnings

Earnings growth stalled from 2013 to 2017. However, 2018 earnings were strong. This was a result of revenue growth and cost synergies from recent acquisitions. And, lower income tax rates.

The 2019 earnings decrease is due to 1-time restructuring charges related to the company’s cost-savings plan. Also, non-cash write-offs of intangible assets from the business products group that has been sold.

The dividend payout ratio has ranged between 50% and 60% in recent years. And, it had been at the lower end of that range until 2019. Then spiked to over 70% because of the earnings decrease we just discussed.

A lower dividend payout ratio is generally better for the investor. It shows the company has ample room to raise the dividend in the coming years. Or, withstand an earnings drop without having to reduce their dividend.

Finally, GPC management has set a goal to increase annual earnings by 7-10% per share over the long term.

Next, let’s look at the GPC dividend payout ratio based on cash. Absent accounting charges, it will give us a clearer picture if the company has its dividends well covered by cash flow.

GPC Stock Dividend Payout Ratio Based on Cash Flow

As the chart below indicates, Genuine Parts generates ample free cash flow.

Chart 4: GPC Stock Dividends Versus Cash Flow Generated

Genuine Parts dividend payout ratio based on cash flow

The regular dividend payments have consumed about 55% of that cash over the past 3 years. Any excess cash is usually allocated to strategic acquisitions and share repurchases.

Their historical use of cash is consistent with their objectives going forward. They state in their recent investor presentation the following priorities for cash:

Reinvestment in businesses
Acquisitions
Increasing dividends
Share repurchases

Management has stated its intentions to keep acquisitions smaller and suspend share repurchases for the near term. This tells me the GPC dividend is a greater priority than either of those options for the company’s cash.

And that’s fine with me. As long as the acquisitions remain smaller in nature, I am okay with it.

I would prefer not to see another large acquisition the size of Alliance Automotive Group in the near future. That acquisition helped them expand their international business operations. But, more acquisitions of that size may limit future dividend growth.

Speaking of dividend growth. Let’s cobble together a forecast for GPC annual dividend growth next.

GPC Stock Dividend Growth Forecast

I look at dividend policy, historical dividend growth rates, the dividend payout ratio, and business fundamentals to forecast future dividend growth.

Here’s a few specific facts that have been uncovered for Genuine Parts:

Targeting a 50%-55% dividend payout ratio
Forecasting long-term earnings growth of 7-10% annually
2019 dividend payout ratios higher than target at more than 70%

Based on my review, I’m going to forecast a 5-6% annual dividend growth rate. GPC dividend growth will trail earnings growth to allow for a reduction in their dividend payout ratios.

The longer-term dividend growth rate may very well be higher. But I’m not willing to raise my forecast for long-term dividend appreciation until I see improvement and consistency in GPC’s financial performance.

Before I comment on dividend safety, let’s check the company’s financial position. A strong balance sheet definitely supports dividend safety.

Genuine Parts Financial Position

Before 2017, GPC had not borrowed large sums of money. However, they did increase their borrowings in 2017. They did this to fund the Alliance Automotive Group acquisition.

GPC’s debt is held by a group of private financial institutions. Since GPC has no publicly held debt, it does not have a public credit rating.

The company’s debt to equity ratio checks in at 1.1 to 1. This is a reasonable level and shows a very balanced capital structure.

GPC Stock Dividend Safety

I look at a number of factors to form an opinion on Genuine Parts dividend safety.

Those factors include:

Dividend payout ratios
Historical dividend track record
Size of the dividend yield
Free cash flow generation
Financial position
Business health

Based on my review of these areas, I judge the Genuine Parts dividend to be very safe. And when I say safe, I mean that it is unlikely to be reduced in the foreseeable future.

Before I wrap up, let’s discuss the GPC stock price and assess its valuation.

Thoughts On The GPC Stock Price

Over the past several years, the Genuine Parts stock price has traded in a fairly narrow range. Given the ongoing bull market in stocks, GPC’s lack of participation has been a bit of a disappointment for me.

Concerns over the disruption Amazon could have on GPC’s business may have depressed the stock price. On the other hand, GPC relies on professional independent auto repair shops for a large percentage of their business. Because of this, I believe the fears about Amazon have been overstated.

I also think GPC stock was overvalued several years ago. This has led to a correction in value through stock price stagnation combined with earnings growth. My hunch is this combination of events has left the stock more reasonably valued than in the past.

But, let’s not work on hunches, let’s take a closer look at valuation next to prove that out. Because a successful investor does their best not to overpay for dividend stocks.

GPC Stock Valuation

I will judge GPC stocks value using the following measures and resources:

Dividend discount model
Price to earnings ratio
Morningstar fair value estimate
Simply Investing Report

Genuine Parts Dividend Discount Model

I use the Gordon Growth Model for valuing dividend stocks. It’s one type of dividend discount model that many dividend investors use.

The model considers several factors I have discussed thus far.

Current annual dividend payments – $3.16 per share
Projected dividend growth – 5.5%
My desired annual return on investment – 9%

Using these assumptions, the dividend discount model calculates the fair value of Genuine Parts stock at $95 per share.

Genuine Parts Stock Price To Earnings Ratio

After adjusting out the one-time impacts of the restructuring and asset write-offs in 2019 earnings, the GPC stock price to earnings ratio sits at about 18 times.

This appears to be a reasonable valuation to me. Certainly not excessive.

I think stock market investors want to see Genuine Parts make progress on achieving its financial targets. Once they do, the price to earnings ratio will likely expand.

Morningstar Fair Value Estimate For GPC Stock

The investment analysis firm, Morningstar, believes Genuine Parts stock to be fairly valued at $90 per share.

Source: Morningstar.com

Simply Investing Report Assessment Of GPC Stock Valuation

First of all, the Simply Investing Report uses tough criteria when it judges the value of a dividend stock. You can read more about how Simply Investing values dividend stocks in my review article.

Furthermore, Simply Investing is an excellent source for dividend stock reviews and recommendations. I refer to it frequently.

Finally, the Simply Investing Report judges GPC stock to be overvalued at recent price levels.

GPC Stock Valuation Summary

We have looked at a number of valuation methods that suggest a range of values for GPC stock.

Here is a summary:

Dividend discount model: $95 per share
Price to earnings ratio: reasonable – priced for slow growth
Morningstar fair value: $90 per share
Simply Investing Report: considers GPC stock overvalued

Collectively, the value measures show that GPC stock is slightly overvalued, in my opinion.

Okay. We have covered Genuine Part’s business, the GPC stock dividend metrics, and the GPC stock valuation. So, let’s wrap up our dividend stock analysis now.

GPC Stock Dividend & GPC Stock Analysis Wrap Up

I believe that Genuine Parts stock is one of many solid investment options for dividend growth stock investors like me. GPC represents a good combination of current dividend yield and future dividend growth.

But, it comes with a slightly overvalued price. In my opinion, GPC looks like a very good value at or below $90 per share.

That purchase price equates to a 3.5% dividend yield. And combined with the 5-6% projected annual dividend growth provides solid growing cash flow for my dividend income.

In addition, the GPC dividend safety scores solid marks. Also, it’s hard to ignore royalty. 64 consecutive years of dividend growth make Genuine Parts a Dividend King!

Genuine Parts holds a mid-size position in my portfolio. I will keep an eye out for GPC stock trading opportunities to increase my position over time. Since I expect the stock price to rise over the long term.

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GPC Stock Dividend Review & Stock Analysis: Genuine Parts Company

GPC Stock Dividend: A Dividend King!