A Top Dividend Growth Stock With Over 50 Straight Years of Dividend Increases

Genuine Parts Company is a high-quality dividend stock that has delivered consistent dividend growth and business results for decades.
By Brian Bollinger ,

Genuine Parts Company (GPC) - Get Report has grown its sales in 63 of the last 65 years and increased its profit in 50 of the last 54 years. How many of your stock holdings can make those claims?  Genuine Parts has also increased its dividend for more than 50 straight years and is one of the most reliable dividend growth stocks in the market.

This is the type of business we like to own in our Top 20 Dividend Stocks portfolio. Let's take a closer look at the company.

Genuine Parts was founded in 1928 and distributes automotive replacement parts, industrial replacement parts, office products and electrical materials. Its products and services are offered through a network of approximately 2,600 locations throughout the U.S. (82% of sales), Canada (10%), Mexico (1%), Australia (7%) and New Zealand.

Slightly more than half of the company's sales are generated from the automotive market. Genuine Parts' products are primarily sold under the NAPA brand, and the company owns about 1,100 of the 6,000 NAPA stores it delivers to. Another 31% of revenue is generated from industrial products, 11% from office products and 5% from electrical materials.

Genuine Parts' primary competitive advantages are its extensive distribution network, breadth of products, long-standing customer relationships and brand name reputation.

The company is a leading distributor to its four primary end markets with No. 1 or No. 2 market share positions in every segment. As one of the largest players, Genuine Parts can afford to hold significantly more inventories and offer better delivery times than many of its competitors.

The company's network of distribution centers and supply-chain management expertise are additional advantages.

Genuine Parts' auto business has the largest auto parts network in the country with 60 distribution centers, making it the most convenient and cost-effective supplier to work with. Many of the company's key accounts (e.g., Goodyear Firestone, Midas) could not be effectively served by smaller players in the market.

The aftermarket business possesses many attractive characteristics as well. Demand trends are relatively stable, and the market is huge and fragmented. The auto aftermarket industry is roughly $100 billion in size, and the industrial business has an estimated market size of $70 billion, providing plenty of room for Genuine Parts to continue growing.

Overall, Genuine Parts shares many qualities with Warren Buffett's portfolio of dividend stocks.

Turning to the dividend, Genuine Parts has been one of the most reliable payers in the market. 2015 marked Genuine Parts' 59th consecutive year of increased dividends paid to shareholders, more than doubling the dividend growth requirement to be part of the S&P Dividend Aristocrats Index.

Genuine Parts has paid a cash dividend to shareholders every year since going public in 1948 and most recently raised its dividend by 7% in early 2015. The company has consistently grown its dividend by 7% per year over the last decade and shows no signs of slowing down with a healthy dividend payout ratio near 55%.

Genuine Parts is practically the definition of a blue-chip dividend stock. It generates consistent free cash flow, maintains a conservative balance sheet, operates in a slow-changing industry, sells recession-resistant products and has increased its dividend for nearly 60 consecutive years.

It's hard to find a more reliable dividend grower than Genuine Parts.

This article is commentary by an independent contributor. At the time of publication, the author did not hold any positions stocks mentioned.

Loading ...