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Genuine Parts: Driving Gains in Auto Parts

10/10/2018 5:00 am EST

Focus: INDUSTRIALS

Vita Nelson

Founding Publisher and Editor, Moneypaper

Founded in 1925 and headquartered in Atlanta, Genuine Parts Company (GPC) is a consumer service organization engaged in the distribution of auto and industrial replacement parts, notes dividend reinvestment expert Vita Nelson, editor of DirectInvesting.

The automotive segment distributes replacement parts for all makes and models of automobiles, trucks, and other vehicles. Its market cap of $14.6 billion and its long history of consistent earnings growth and dividend payments makes it a solid company.

It is considered a well-diversified business with a durable competitive advantage over its rivals that also enjoys a solid corporate culture. Consensus estimates call for the company to earn about $5.65 per share this year, up from $4.64 per share last year, and to go to about $5.91 per share next year.

Genuine Parts Co. has paid dividends to investors since 1948 and has increased its payments for 61 consecutive years, which makes it a dividend aristocrat. During the past five years, it has increased its dividends at an average rate of 5.7%, and its quarterly payment of $0.72 per share currently provides a yield of 2.85%.

The stock exhibits a healthy Dividend Payout Ratio (DPR is the proportion of earnings paid out as dividends to shareholders) of 67.0%, which means the company is paying out 67.0% of all its net income in dividends and is retaining a large percentage of earnings to reinvest or grow the business. Its Price to Sales ratio of 0.8 is 63.5% below the S&P 500 index.

With the stock being fundamental and technically attractive, this company is an appropriate holding for investors who wish to build a holding over the long term.

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