Investors looking for the best dividend growth stocks should consider companies with the longest histories of dividend growth, explains leading income expert Ben Reynolds, editor of Sure Dividend.
Several high-quality dividend payers can be found on the Dividend Kings list, a group of less than 30 stocks that have each raised their dividends for at least 50 consecutive years
Genuine Parts Company (GPC) is a Dividend King with a long history of dividend increases, a high 4.5% dividend yield, and a positive long-term outlook thanks to a major growth trend.
The company has been hit hard by the coronavirus crisis, but long-term investors will likely generate strong returns by buying at the current price.
Genuine Parts is an automotive and industrial parts distributor and retailer. Its core business is its NAPA auto parts brand. The company generates annual sales of $20 billion, with a market capitalization of $10.2 billion.
Genuine Parts reported quarterly earnings on May 6th. While total sales declined 3.7% for the quarter, sales increased 1% excluding divestitures. Comparable sales declined 5% in automotive parts, industrial parts, and business products.
The company is likely to see continued declines in the current quarter, due to the ongoing coronavirus crisis. But it has taken multiple steps to get through the downturn. As of March 31st, it had $1.1 billion in available liquidity through cash on hand and unused revolving credit capacity.
The company also has a manageable level of debt maturities totaling $298 million through 2021. Genuine Parts is also reducing its 2020 capital expenditures by 35%-50%, and has suspended its share buybacks to preserve cash.
Despite the difficult near-term environment for Genuine Parts, investors should focus on the long-term. Genuine Parts is a leading brand in a growing industry, specifically automotive parts. The aging U.S. vehicle fleet will benefit Genuine Parts. Instead of buying new vehicles, consumers are increasingly having trained professionals make repairs on their cars to keep them on the road longer.
According to a recent company presentation, the average repair cost per year of a vehicle aged 1-5 years is $555, but rises to $829 for a vehicle older than 6 years. V
ehicles at least 6 years old now represent ~70% of the U.S. vehicle fleet. While these trends are negative for automotive manufacturers, since consumers are holding onto their cars longer, it is a major benefit for Genuine Parts.
These trends will allow Genuine Parts to continue its impressive history of raising dividends each year. It has increased its dividend for 64 consecutive years, and the stock has a high yield of 4.5%.
Genuine Parts stock has appeal for investors looking for current yield, as well as dividend growth. All of these factors make the security our fifth favorite Dividend King now.
