We recently compiled a list of the 10 Best Dividend Stocks of All Time. In this article, we are going to take a look at where Genuine Parts Company (NYSE:GPC) stands against the other dividend stocks.

Dividend stocks aren’t a quick fix for investing; they offer lasting rewards over time. Unfortunately, many investors miss the boat on this and expect to strike it rich overnight. When that doesn’t pan out, they chase the latest stock market trends, ignoring the steady gains that dividend stocks can provide. This trend has been evident over the past year, with AI stocks taking the spotlight and leaving income stocks in the dust. However, there’s a silver lining: many tech companies have begun offering dividends this year, highlighting their long-term potential.

The current yields of these tech stocks might be small, which leads many income investors to overlook their impressive growth records. This is unfortunate because dividend growth can significantly boost both long-term income and capital gains. Analysts believe that dividend growth and sustainability are more crucial than just the yield. For instance, Microsoft’s roughly 864% return over a decade far outpaces the returns from non-tech stocks like AT&T and Chevron, despite their higher yields. The tech giant currently pays $0.75 per quarter and offers a dividend yield of 0.7%. However, you need to keep in mind that its quarterly dividend was $0.28 a decade ago and its dividend yield was 2.5%. Despite the nearly tripling its quarterly dividend, the stock’s yield went down to 0.7% and that was a great thing for its dividend investors.

Dividend stocks are often compared not just with high-yield stocks but also with those that don’t pay dividends to provide investors with a comprehensive view. According to data from Hartford Funds, from 1973 to 2023, dividend-paying companies offered an average annual return of 9.17%, while stocks without dividends only returned 4.27%. The report also noted that companies with stable dividends had an average return of 6.74%, which lagged behind the performance of companies that increased their dividends.

While regularly increasing dividends is challenging, maintaining consistent payouts year after year is also no easy feat for companies. Analysts warn against yield traps—stocks with high yields but unstable dividend policies. Brian Bollinger, president of Simply Safe Dividends, shared his views on dividend investing in a CNBC interview. He recommended focusing on top-quality companies, which often provide dividend yields of around 3% to 4%. These firms usually show steady growth in their dividend payments, boosting the annual income stream and helping to counteract inflation. He also pointed out that stocks with lower yields tend to be safer investments with more reliable payout structures.

In this article, we will take a look at some of the best dividend stocks of all time that have consistent records of paying dividends to shareholders.

Our Methodology:

For this article, we scanned the list of companies that have paid dividends to shareholders for at least 75 years. From that list, we picked companies with dividend yields of above 2%, as of July 23. We analyzed these companies through their balance sheets and overall financial health to determine their dividend stability. Additionally, we assessed the sentiment of hedge funds for each stock using Insider Monkey’s Q1 2024 database. The stocks are arranged in ascending order based on the number of hedge funds that hold stakes in these companies. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).

Genuine Parts Company (NYSE:GPC)

Number of Hedge Fund Holders: 36

Dividend Yield as of July 23: 2.93%

Genuine Parts Company (NYSE:GPC) is a Georgia-based industrial supplies company that specializes in automotive and industrial replacement parts. a global leader in distributing automotive and industrial parts. Generally, the company’s two business segments—automotive and industrial—work together like a perfect balance, with one segment compensating for the other’s performance during cyclical fluctuations. However, this hasn’t been the case in its most recent quarter. In its recently-announced Q2 2024 earnings, the results indicate weaker-than-expected market conditions, which have dampened demand, especially in the Industrial and U.S. and European Automotive segments. The company reported global Automotive sales of $3.7 billion, marking a 2.0% increase from the same period in 2023. This growth included a 3.1% boost from acquisitions, which was partially offset by a 0.6% decline in comparable sales and a 0.5% negative impact from foreign currency and other factors. Segment profit was $314 million, down 4.7%, with a profit margin of 8.4%, which is 60 basis points lower than the previous year.

Despite this, Genuine Parts Company (NYSE:GPC) is well-positioned to benefit from the steady demand for replacement parts, which is fueled by the increasing cost of new cars. With fewer people in the U.S. able to afford new vehicles due to higher interest rates and supply chain issues driving up prices, the demand for replacement parts remains strong.

In addition, Genuine Parts Company (NYSE:GPC) is also strong from a dividend point of view because of its cash generation. In the first six months of 2024, the company reported an operating cash flow of $612 million and its free cash flow amounted to $353 million. Moreover, it returned $272 million to shareholders through dividends. The company has paid regular dividends to shareholders over the past 76 years and maintains a 68-year track record of consistent dividend growth. The company offers a quarterly dividend of $1.00 per share for a dividend yield of 2.93%, as of July 23.

In addition to a strong dividend history, Genuine Parts Company (NYSE:GPC) has an attractive valuation, currently trading at a forward P/E ratio of 14.01. The stock appears relatively inexpensive compared to competitors such as Autozone Inc (NYSE:AZO) and O’Reilly Automotive Inc (NASDAQ:ORLY), which have forward P/E ratios of 17.86 and 25.32, respectively, and do not pay dividends to shareholders. This makes GPC an attractive option for investors seeking exposure to a growing market while also receiving consistent dividend income.

At the end of March 2024, 36 hedge funds in Insider Monkey’s database held stakes in Genuine Parts Company (NYSE:GPC), unchanged from the previous quarter. Their positions have a consolidated value of nearly $700 million.

Overall GPC ranks 5th on our list of the best dividend stocks to buy. You can visit 10 Best Dividend Stocks of All Time to see the other dividend stocks that are on hedge funds’ radar. While we acknowledge the potential of GPC as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued dividend stock that is more promising than GPC but that trades at less than 7 times its earnings and yields nearly 10%, check out our report about the dirt cheap dividend stock.

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Disclosure: None. This article is originally published at Insider Monkey.