Genuine Parts Company (NYSE:GPC) is hardly a household name, but you’ll find it among the largest producers of auto parts in the industry, and its NAPA Auto Parts stores are widely known among vehicle owners and mechanics alike. Unlike Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM), you’ll also find Genuine Parts Company (NYSE:GPC) on the list of Dividend Aristocrats, where admission is determined by whether a company can manage to boost its dividend payouts to shareholders every single year for at least a quarter century. Only a few dozen stocks make the cut, demonstrating their staying power even through tough times. Let’s take a closer look at Genuine Parts Company (NYSE:GPC) to see whether it can use recent success in the auto industry to sustain its long streak of rewarding dividend payouts to investors.
Dividend Stats on Genuine Parts
| Current Quarterly Dividend Per Share | $0.5375 |
| Current Yield | 2.8% |
| Number of Consecutive Years With Dividend Increases | 57 years |
| Payout Ratio | 49% |
| Last Increase | March 2013 |
Source: Yahoo! Finance. Last increase refers to ex-dividend date.
What’s up with Genuine Parts lately?
Genuine Parts Company (NYSE:GPC) hasn’t hesitated to share its wealth with shareholders lately, both in terms of its dividend, and through share-price increases. The stock has soared more than 30% so far this year as the company benefits from the overall strength in the industry.
What’s interesting, though, is that historically, auto-parts makers are seen as relying on the lack of success among automakers. After all, new cars don’t need parts nearly as often as older cars do, and when Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM) perform well, their customers don’t have to rely as much on Genuine Parts or competitors AutoZone, Inc. (NYSE:AZO) and Advance Auto Parts (NYSE:AAP) for replacements. Yet, even though Advance’s 15% gain, and AutoZone, Inc. (NYSE:AZO)’s 20% rise year to date, aren’t quite as substantial as Genuine Parts Company (NYSE:GPC), they still signal a paradigm shift in the way investors look at the industry, perhaps recognizing that for every new car sold, there’s usually a used car that gets traded in, and so good news for Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM) sales might actually translate into more business for the parts industry.
Another part of the explanation might come from Genuine Parts Company (NYSE:GPC)’ other businesses. Office products and electronics haven’t been big growth areas lately, but the company’s sales of bearings and hydraulic and pneumatic components to industrial users give it valuable diversification from its auto-part focus. Strong relationships with its commercial customers have helped the company sustain its momentum, and even though the company missed estimates in its most recent quarter, CEO Tom Gallagher believes that the remainder of the year should improve from its poor first-quarter performance.
Genuine Parts dividend data by YCharts.
As you can see, Genuine Parts hasn’t been stingy with its dividends lately. After a series of tiny increases in the early 2000s, the company has accelerated its dividend growth, with increases of 10% in 2012, and almost 9% earlier this year. Yet, with the company only paying out about half its earnings in dividends, Genuine Parts’ earnings growth seems more than ample to produce further increases in dividends in the future.
When will Genuine Parts raise its dividends again?
Genuine Parts Company (NYSE:GPC) just raised its dividend in March, so it would be extraordinary for the company to boost its payout again before 2014. But as long as prospects in the industry keep improving, investors should look for good things from Genuine Parts.
The article Forget Ford! This Hidden Auto Play Is a Dividend Giant originally appeared on Fool.com and is written by Dan Caplinger.
Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford.
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