Dividend investors seek big and safe yields. Genuine Parts‘s (NYSE: GPC) dividend history is long, so we can see valuable trends to determine the sustainability. I’ve built three useful charts below, so let’s dig into the company.
Business Overview and Highlights
Genuine Parts is a $14 billion business based out of Atlanta, Georgia. The business employs 48,000 people and brought in $16 billion in sales last year. That works out to $340,000 employee.
Genuine Parts is in the consumer sector and provides automotive parts. The automotive sector is competitive, and some of the top car brands are struggling. For example, Ford’s dividend safety isn’t looking good.
Although car companies are about to hit hard times, Genuine Parts might still be a good dividend stock. Let’s dig into the recent trends.
Genuine Parts Dividend History Over 10 Years
The company paid investors $1.56 per share a decade ago. Over the last 10 years, the dividend has climbed to $2.7. That’s a 73% increase! You can see the annual changes below.
Over the last 10 years, the compound annual growth is 5.6%… but over the last year, the dividend climbed 2.7%. The slowdown in dividend growth isn’t a great sign. However, Genuine Parts still might be a decent investment. Let’s take a look at the yield.
Current Yield vs. 10-Year Average
Genuine Parts’s long history of paying dividends makes it a top dividend stock. This also makes the dividend yield a great indicator of value. A higher yield is generally better for buyers. Sustainability is also important.
The dividend yield comes in at 3.03%, which is below the 10-year average of 3.76%. The chart below shows the dividend yield over the last 10 years.
The lower yield shows that investors have bid up the company’s market value. They might be expecting higher growth and payouts. But more often than not, the dividend yield is mean-reverting with share price changes.
Improved Dividend Safety Check
Many investors look at dividend payout ratio to determine dividend safety. To do this, they look at the dividend per share divided by the net income per share. So a payout ratio of 60% would mean that for every $1 Genuine Parts earns, it pays investors $0.60.
Payout ratio is a good indicator of dividend safety… but accountants manipulate net income. They adjust for goodwill and other non-cash items. A better metric is free cash flow.
Here’s Genuine Parts’s payout ratio based on free cash flow over the last 10 years.
The ratio is volatile over the last 10 years, and the trend is up. The last reported year shows a payout ratio of 60.4%. This gives wiggle room for Genuine Parts’s board of directors to raise the dividend.
Closing Thoughts: Genuine Parts Dividend History and Safety
The dividend looks safe at its current level, but the yield isn’t too enticing. The headwinds on car manufacturers might also put pressure on new sales from Genuine Parts.
To uncover more dividend stocks, check out some of our top dividend investing research.
Good investing,
Rob
