We recently compiled a list of the 10 Undervalued Dividend Aristocrats To Buy According to Hedge Funds. In this article, we are going to take a look at where Genuine Parts Company (NYSE:GPC) stands against the other undervalued dividend aristocrats to buy according to hedge funds.
A dividend aristocrat is an S&P 500 company that not only maintains regular dividend payments to shareholders but also increases its payouts annually. To qualify as a dividend aristocrat, a company must raise its dividends consistently for at least 25 consecutive years.
Michael Clarfeld, Portfolio Manager at ClearBridge, recently talked about why companies that consistently grow their dividends are well-positioned to handle the challenges of 2025. With rising costs, tighter margins, higher interest rates, and inflation on the horizon, Clarfeld is still optimistic about the economy. He pointed to strong employment numbers, upbeat consumer sentiment, and confident businesses, especially after the election. Pro-business policies under the Trump administration could drive investments and growth, which sounds great, but there’s a catch. For instance, bringing manufacturing back to the US would create jobs and boost wages, but it could also increase business costs. After two strong years, Clarfeld doesn’t see much room for big capital gains in 2025. Plus, with inflation sticking around, the Federal Reserve is likely to take a more cautious approach. That said, he sees opportunities in sectors like European and global consumer staples and US energy infrastructure.
Clarfeld is a big fan of dividend growth stocks, calling them a timeless investment. They can act as a safety net during volatile markets and provide steady income, which is especially useful when capital appreciation feels out of reach. He also highlighted how dividends help protect your purchasing power by keeping up with inflation. In his view, dividend growth is a smart and reliable strategy for navigating a potentially bumpy 2025.
Paul Baiocchi of SS&C ALPS Advisors sees dividend investing as a smart move, expecting the Fed to ease rates. According to Baiocchi, investors are shifting from money markets and fixed income to dividend-paying stocks, especially companies with leverage that could benefit from lower interest rates. Similarly, Mike Akins of ETF Action also sees dividend ETFs as a defensive play, highlighting that the companies included typically have strong balance sheets. He notes the growing popularity of dividend-focused ETFs, suggesting that consistent dividends give investors confidence in a company’s stability and financial health. Both experts agree that dividends offer a sense of durability and drawdown protection in uncertain markets.
A line of mechanics diagnosing a recreation vehicle engine at a repair shop.
Our Methodology
In this article, we selected stocks from the Dividend Aristocrats List that had a P/E ratio below 20 as of December 23. Our focus was on identifying stocks with the strongest hedge fund sentiment in Q3 2024 among the 66 Dividend Aristocrats that also met our P/E criteria. The stocks are ranked below in ascending order based on the number of hedge fund holders for each company.
At Insider Monkey, we are obsessed with 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)
Dividend Yield as of December 23: 3.46%
Number of Hedge Fund Holders: 27
P/E Ratio: 14.89
Genuine Parts Company (NYSE:GPC) specializes in distributing automotive and industrial replacement parts. Its operations are divided into two segments – Automotive Parts Group and Industrial Parts Group. The company supplies automotive parts for hybrid and electric cars, trucks, buses, motorcycles, farm vehicles, and marine equipment. Its customers include repair shops, service stations, fleet operators, auto dealers, and individual consumers. Beyond distribution, the company offers repair and assembly services such as gearbox repairs, hydraulic drive shaft repairs, and hose manufacturing. GPC boasts an exceptional streak of 68 consecutive years of dividend increases, earning its place among the top picks for the best dividend aristocrat stocks.
Genuine Parts Company (NYSE:GPC) has a rich legacy, supported by its long-standing brands like NAPA, which celebrates its 100th anniversary next year, and Motion, a leader in industrial solutions since 1946. With strong operations across Europe, Asia Pacific, Canada, and beyond, GPC positions itself as a unified team leveraging global scale to capitalize on opportunities in its fragmented industries.
GPC adjusted its 2024 outlook due to persistent weak market conditions observed in the third quarter, which impacted demand across its segments. Diluted earnings per share expectations were revised to $6.60–$6.80, down from the earlier projection of $8.55–$8.75, while adjusted EPS guidance was reduced to $8.00–$8.20 from $9.30–$9.50. The company anticipates total sales growth of 1%–2%, driven in part by acquisitions, with Automotive sales expected to grow 3%–4% and Industrial sales declining by 1%–2%.
Challenging market conditions, including inflation, high interest rates, and geopolitical uncertainty, continue to affect both the US and international automotive businesses. Despite short-term headwinds, GPC maintains strong cash flows, projecting $1.3–$1.5 billion in cash from operations and $800 million–$1 billion in free cash flow for 2024. Genuine Parts Company (NYSE:GPC) has spent $954 million on acquisitions this year, including the purchase of Walker Automotive Supply, which aligns with GPC’s balanced strategy of owning and partnering with independent stores. The company’s pension de-risking strategy also progressed, with plans to transition the US pension plan to a third-party insurer by 2025. This move, which reduces financial volatility, will have no immediate cash impact in 2024.
Insider Monkey’s third-quarter database shows that Genuine Parts Company (NYSE:GPC) was part of 27 hedge fund portfolios, down from 31 in the last quarter. Harris Associates is the largest stakeholder in the company, with 2.3 million shares worth about $325 million.
Overall, GPC ranks 8th on our list of the undervalued dividend aristocrats to buy according to hedge funds. While we acknowledge the potential of GPC to grow, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GPC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.