Dividend Stock Pick of the Week
In yesterday’s article, Dr. Steve Sjuggerud provided even more evidence that now is the time to invest in reliable, dividend-paying stocks.
Of course, in recent weeks, I’ve given you more than just proof. I’ve provided several specific opportunities to consider, including Cellcom Israel, Tanger Factory Outlet Centers and Telefonica. Today, it’s time to add one more dividend stock to the list – Genuine Parts Company (NYSE: GPC).
Nothing But Steady Growth on the Horizon
I originally pegged Genuine Parts – a leading provider of auto and other industrial replacement parts in North America – as an attractive investment back in November of 2009.
Readers that followed my original advice are now sitting on a gain of roughly 60% (including dividends). But don’t let that run-up scare you away. The stock represents an equally attractive investment today.
For one thing, it caters to an increasingly large market.
Consider: The U.S. automotive aftermarket currently stands at $215 billion in annual sales. And it’s expected to grow a steady 3.8% per year to almost $250 billion by 2014, according to the Automotive Aftermarket Industry Association.
There’s very little that can derail that growth, either. Thanks to population growth, the number of cars on the road is bound to keep increasing. Plus, the average American is keeping his car much longer.
In fact, since 1999, the average age of cars and light trucks in use has steadily expanded from 8.8 years to 10.6 years in 2010, according to R.L. Polk & Co.’s data. And because of the lingering effects of the recession on consumer spending, the average age of vehicles is only expected to continue to increase.
Add it all up and more – and older – cars on the road should translate into more repair and maintenance work and, ultimately, more sales for companies like Genuine Parts.
The company’s latest results only underscore the steady and increasing demand…
In the third quarter, Genuine Parts reported an 11% rise in sales to $3.3 billion and a 17% bump in earnings per share to $0.97. Both beat expectations, which really isn’t all that surprising since the company’s bested analyst earnings expectations for 11 consecutive quarters (and counting).
From a balance sheet perspective, the company remains rock solid. It’s sitting on $534.8 million in cash and only $250 million in debt.
A Respectable (and Growing) Dividend, Too
Given the company’s financial health, there’s no doubt Genuine Parts can maintain its existing dividend of $1.80 per year, equivalent to an attractive 3.1% yield at current prices.
The really good news is we can expect that dividend to increase over time. For the past 55 years, Genuine Parts not only paid, but also increased its dividend.
Considering the last dividend increase came in February, we could be just months away from another one. That makes now an opportune time to consider adding the stock to your portfolio, especially with shares trading at such a reasonable valuation of 15 times future earnings.
Ahead of the tape,