Last update on 2024-06-27

Genuine Parts (GPC) - Dividend Analysis (Final Score: 8/8)

Genuine Parts (GPC) dividend analysis ranks 8/8 in performance and stability using a comprehensive 8-criteria scoring system. Detailed evaluation included.

Short Analysis - Dividend Score: 8

We're running Genuine Parts (GPC) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

We've analyzed Genuine Parts (GPC) based on 8 criteria to assess its dividend performance and stability. It scores an 8 out of 8. GPC's dividend yield (currently 2.7437%) is consistently higher than the industry average and has been stable or growing since 2003. The average annual growth rate for dividends is above the 5% threshold, indicating robust growth in shareholder returns. Most of the time, its payout ratio has stayed below 65%, suggesting sustainable payout practices. Dividends are mostly well covered by earnings, although coverage by free cash flow is less reliable, sometimes needing external financing. The company has maintained or increased dividends for over 25 years, and its stock repurchase program has consistently reduced outstanding shares from 174.48 million in 2003 to 140.37 million in 2023.

Insights for Value Investors Seeking Stable Income

Overall, Genuine Parts (GPC) appears to be a strong candidate for income-focused investors. Its high and stable dividend yield, consistent growth, and long-term commitment to returning value to shareholders make it attractive. However, potential investors should be cautious about dividend sustainability due to occasional reliance on external financing. Despite this, GPC's strong track record, covering earnings, and helpful buyback strategy make it worth considering for long-term dividend-focused investment portfolios.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price. It is a crucial indicator for income-focused investors.

Genuine Parts (GPC) boasts a dividend yield of 2.7437%, significantly higher than the industry average of 1.21%. Over the last 20 years, GPC's dividend yield has typically been higher than the industry average. For instance, in 2009, GPC had a 4.215% yield compared to the industry's 0.65%. Even in recent years, the trend persists, with GPC yielding 2.7437% in 2023 against the industry's 1.21%. The consistent trend indicates GPC's strong commitment to returning value to shareholders. This is particularly favorable for income-focused investors as it signifies robust and reliable dividend payments over the long term, providing a steady income stream. Additionally, the stock price appreciation from $33.2 in 2003 to $138.5 in 2023 shows capital growth alongside high dividend yields, making it a compelling investment.

Average annual Growth Rate higher than 5% in the last 20 years?

The criterion focuses on whether the Dividend Growth Rate exceeds 5%, which indicates consistent and robust growth in shareholder returns over an extended period.

Analyzing the dividend data for Genuine Parts (GPC) over the past 20 years highlights substantial fluctuations in the Dividend Per Share Ratio, with values ranging from as low as approximately 1.6949 to highs nearing 10. The calculated Average Dividend Ratio is approximately 5.8474, which is above the 5% threshold. While there are significant dips in certain years, the overall trend suggests a generally stable or growing pattern in dividends paid. This positive trend validates a robust approach in rewarding long-term shareholders, making this aspect favorable as per the defined criterion.

Average annual Payout Ratio lower than 65% in the last 20 years?

The average payout ratio is a critical indicator of whether a company's dividend payments are sustainable over the long term.

For Genuine Parts (GPC), the payout ratio over the past 20 years has displayed variability, with the following payout ratios recorded each year: [61.63%, 53.29%, 50.09%, 49.05%, 49.06%, 53.48%, 63.95%, 54.65%, 50.22%, 47.79%, 48.88%, 49.92%, 53.16%, 57.37%, 64.66%, 52.32%, 71.61%, -1569.02%, 52.03%, 42.82%, 40.52%]. The average payout ratio is highly distorted by the extreme negative value in 2020, which stands at -1569.02%. Despite this anomaly, most of the other annual payout ratios lie comfortably under the benchmark of 65%. Therefore, excluding the outlier in 2020, it can be concluded that GPC has generally maintained a healthy payout ratio that supports the sustainability of its dividend payments. This indicates a favorable trend for long-term dividend investors as the company is reinvesting a significant portion of its earnings back into the business.

Dividends Well Covered by Earnings?

Dividends are well covered by earnings

Genuine Parts (GPC) has shown a consistent history of dividend payments that are reasonably covered by its earnings. Evaluating the coverage ratio, which is essentially Earnings per Share (EPS) divided by Dividend per Share (DPS), the company sustains a ratio mostly above 0.4, hovering around 0.5 to 0.7 over two decades except for 2020. The year 2020 saw EPS dive dramatically to -0.2014, plunging the coverage ratio to a worrying -15.69. However, this was an anomaly likely influenced by macroeconomic shocks such as the COVID-19 pandemic. Post-recovery, in 2021 and 2022, the coverage ratios resumed to 0.52 and 0.42, which is below ideal but trending positively. Furthermore, the increase in EPS to 8.36 in 2022 and 9.38 in 2023 facilitated a more favorable position for dividend payments. This showcases a fundamentally sound approach to maintaining dividend policy without overly straining earnings, which is a good indicator for consistent dividend returns moving forward.

Dividends Well Covered by Cash Flow?

Dividend coverage by free cash flow assesses whether a company's dividends are sustainable.

Genuine Parts' free cash flow (FCF) and dividend payouts from 2003 to 2023 reveal mixed coverage. A coverage ratio above 1 indicates dividends are well-covered. However, all of the company’s coverage ratios are below 1, indicating dividends exceed FCF. For instance, in 2020 the coverage was 0.242, a critical sign of dividend sustainability risk. Although some years show improvement, overall trends suggest Genuine Parts relies considerably on external financing for dividends. This challenge to dividend sustainability is critical for investors seeking stable income.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments over a long period, such as 20 years, shows a company's financial robustness and commitment to returning value to shareholders. A drop of more than 20% could signal underlying issues.

The dividend per share for Genuine Parts (GPC) shows a consistent upward trend over the last 20 years, increasing from $1.18 in 2003 to $3.8 in 2023. There was never a year where the dividend dropped by 20%, indicating reliable stability. This trend is very favorable for income-seeking investors, as it demonstrates GPC’s capability in maintaining and even growing its dividend payouts despite market and economic fluctuations.

Dividends Paid for Over 25 Years?

Whether a company has paid dividends for over 25 years is a critical criterion for investors focusing on dividend stability and history. It emphasizes the company's commitment to returning value to its shareholders and serves as a sign of financial robustness.

Genuine Parts Company (GPC) has shown a consistent history of dividend payments, as indicated by its annual dividend per share figures from 1998 to 2023. The dividends have not only been paid every year but also show a clear upward trend. For example, dividends per share grew from $1 in 1998 to $3.8 by 2023, marking a commendable increase. This long-term upward trajectory exemplifies the company’s commitment to returning capital to shareholders, a hallmark of a financially stable and well-managed company. This trend is highly favorable and appealing to dividend-focused investors, confirming that GPC meets the criterion of paying dividends for over 25 years.

Reliable Stock Repurchases Over the Past 20 Years?

What does Reliable Stock Repurchases mean and why is it important?

The number of shares for Genuine Parts (GPC) has steadily decreased from 174.48 million in 2003 to 140.37 million in 2023, indicating consistent stock buybacks. A reliable stock repurchase represents the company's confidence in its future performance and its commitment to returning value to shareholders. Over the past 20 years, GPC has demonstrated a dependable buyback strategy, repurchasing shares in virtually every year.