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Group 1 (GPI) Rewards Investors With Dividend Hike & Buyback

Group 1 Automotive GPI recently announced that its board of directors approved a quarterly cash dividend of 38 cents per share. This represents a 2.7% increase from the first-quarter 2022 payout. The quarterly dividend will be paid out on Sep 15, 2022 to shareholders of record at the close of the business on Sep 1, 2022. The company’s new annualized dividend rate is now $1.52 per share, resulting in a dividend yield of 0.77% as of Jul 16, 2022.

The company increased its dividend 11 times in the last five years with an annualized dividend growth rate of 9.01%. GPI’s return on equity (ROE) of 37.65% compares favorably with the auto sector’s 9.83%, underscoring management's efficiency in rewarding shareholders.

Additionally, the auto retailer boosted its share repurchase program by $130 million to $250 million. Year to date, Group 1 has bought back 1,546,856 shares of common stock at an average price of $176.80 for $273.5 million, representing 9% of the firm’s outstanding share count as of Jan 1, 2022.

Group 1’s ability to reward shareholders with dividends and buybacks is backed by strong cash flow and revenue generation capacity. The company’s annualized cash flow growth rate has been 26.75% over the past 3-5 years versus the industry average of 24.06%.The year 2021 registered record results, thanks to strong vehicle sales, impressive margins amid supply-demand mismatch, operational efficiency and robust aftersales growth.

In the last reported quarter, GPI reported adjusted earnings per share of $12, beating the Zacks Consensus Estimate of $10.56. The bottom line increased 17.8% from the prior-year quarter’s $10.19 per share. Net sales of $4,145.5 million beat the Zacks Consensus Estimate of $3,998 million. Also, the top line rose 14.3% from the year-ago quarter’s $3,625.6 million.

The firm’s omnichannel efforts to boost sales bode well. Its digital efforts are focused on the online customer scheduling-appointment system, enhancing customer experience. The AcceleRide platform, its online retailing initiative, active at most of the firm’s U.S. dealerships, is likely to aid Group 1’s long-term prospects. The acquisitions of dealerships and franchises to expand and optimize its portfolio are also likely to boost the firm’s growth avenues. In 2021, the company acquired Prime Automotive in the Northeastern United States and the Robinsons Group in the UK, which diversified Group 1’s footprint and are set to buoy top-line growth. In 2021, Group 1 completed transactions representing $2.5 billion of acquired revenues.

Group 1 currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A few better-ranked players in the same space include America’s CarMart CRMT and Rush Enterprises RUSHA.

America's Car-Mart operates automotive dealerships and is one of the largest automotive retailers in the United States, focused exclusively on the Buy Here/Pay Here segment of the used car market. The Zacks Consensus Estimate for CRMT’s fiscal 2023 revenues implies 11.67% growth year on year. The company currently carries a Zacks Rank #1.

Rush Enterprises operates the largest network of Peterbilt heavy-duty truck dealerships in North America and John Deere construction equipment dealerships in Texas and Michigan. The Zacks Consensus Estimate for RUSHA’s 2022 earnings implies 36.21% growth year on year. The company currently carries a Zacks Rank #2 (Buy).


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