Shares of Genuine Parts Company (NYSE:GPC) will begin trading ex-dividend in 2 days. To qualify for the dividend check of US$0.76 per share, investors must have owned the shares prior to 07 March 2019, which is the last day the company’s management will finalize their list of shareholders to which they will send dividend payments. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Genuine Parts’s latest financial data to analyse its dividend attributes.
5 questions I ask before picking a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has dividend per share amount increased over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Will it be able to continue to payout at the current rate in the future?
How does Genuine Parts fare?
Genuine Parts has a trailing twelve-month payout ratio of 52%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 52% which, assuming the share price stays the same, leads to a dividend yield of around 2.9%. Furthermore, EPS should increase to $5.98.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. In the case of GPC it has increased its DPS from $1.6 to $3.05 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes GPC a true dividend rockstar.
Compared to its peers, Genuine Parts has a yield of 2.8%, which is high for Retail Distributors stocks but still below the market’s top dividend payers.
With these dividend metrics in mind, I definitely rank Genuine Parts as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three essential aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for GPC’s future growth? Take a look at our free research report of analyst consensus for GPC’s outlook.
- Valuation: What is GPC worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether GPC is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.