Dividends Value » GWW

Genuine Parts Company (GPC) Dividend Stock Analysis *

D4L — Mon, 11 Apr 2011 07:30:55 +0000

This article originally appeared on The DIV-Net April 4, 2011.

Linked here is a detailed quantitative analysis of Genuine Parts Company (GPC). Below are some highlights from the above linked analysis:

Company Description: Genuine Parts Co is a leading wholesale distributor of automotive replacement parts, industrial parts and supplies, and office products.

Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these four calculations of fair value, see page 2 of the linked PDF for a detailed description:

1. Avg. High Yield Price
2. 20-Year DCF Price
3. Avg. P/E Price
4. Graham Number

GPC is trading at a premium to all four valuations above. The stock is trading at a 14.6% premium to its calculated fair value of $46.81. GPC did not earn any Stars in this section.

Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:

1. Free Cash Flow Payout
2. Debt To Total Capital
3. Key Metrics
4. Dividend Growth Rate
5. Years of Div. Growth
6. Rolling 4-yr Div. > 15%

GPC earned three Stars in this section for 1.), 2.) and 3.) above. A Star was earned since the Free Cash Flow payout ratio was less than 60% and there were no negative Free Cash Flows over the last 10 years. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45%. GPC earned a Star for having an acceptable score in at least two of the four Key Metrics measured. The company has paid a cash dividend to shareholders every year since 1948 and has increased its dividend payments for 55 consecutive years.

Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:

1. NPV MMA Diff.
2. Years to > MMA

The NPV MMA Diff. of the $386 is below the $500 target I look for in a stock that has increased dividends as long as GPC has. If GPC grows its dividend at 4.8% per year, it will take 4 years to equal a MMA yielding an estimated 20-year average rate of 3.9%. GPC earned a check for the Key Metric ‘Years to >MMA’ since its 4 years is less than the 5 year target.

Memberships and Peers: GPC is a member of the S&P 500 and a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company’s peer group includes: Advance Auto Parts Inc. (AAP) with a 0.4% yield, AutoZone Inc. (AZO) with a 0.0% yield and W.W. Grainger, Inc. (GWW) with a 1.6% yield.

Conclusion: GPC did not earn any Stars in the Fair Value section, earned three Stars in the Dividend Analytical Data section and did not earn any Stars in the Dividend Income vs. MMA section for a total of three Stars. This quantitatively ranks GPC as a 3 Star-Hold.

Using my D4L-PreScreen.xls model, I determined the share price would need to decrease to $50.39 before GPC’s NPV MMA Differential increased to the $500 minimum that I look for in a stock with 55 years of consecutive dividend increases. At that price the stock would yield 3.57%.

Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $500 NPV MMA Differential, the calculated rate is 5.4%. This dividend growth rate is slightly above the 4.8% used in this analysis, thus providing no margin of safety. GPC has a risk rating of 1.25 which classifies it as a Low risk stock.

GPC’s long string of dividend increases are supported by its strong underlying fundamentals of sales, earnings and free cash flow growth. The company exhibits excellent financial leadership as evidenced perseverance through the recent downturn. From an operating standpoint, GPC has an extensive distribution network and it has built a loyal customer following over the years. Since the company is trading well above my buy price of $46.81 and slightly above the $50.39 maximum price supported by its dividend fundamentals, I will wait for a pullback before adding to my position. For additional information, including the stock’s dividend history, please refer to its data page.

Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.

Full Disclosure: At the time of this writing, I was long in GPC (2.2% of my Income Portfolio). See a list of all my income holdings here.

The 2010 Elite Dividend Stocks List *

D4L — Wed, 22 Sep 2010 07:30:31 +0000

As dividend growth investors, we want to limit our purchases to only the very best stocks. Our first step is to look at published lists of dividend companies such as S&P 500 Dividend Aristocrats, US Broad Dividend Achievers™ Index and The U.S. Dividend Champions. These lists are used to narrow the population of all publically traded companies down to the very best dividend stocks. When these lists are combined, as I did with the Stock Ideas list, it is still a large and daunting collection of 218 unique companies. So, how do we find the Elite companies on this list?

In 2009, I devised additional criteria to apply to the Stock Ideas list in an effort to eliminate all but the the Elite Dividend Stocks. Here is the additional criteria that I came up with, along with the companies that met the criteria:

A Long Track Record Of Consecutive Dividend Increases: Aristocrats and Champions have increased their dividends for 25 consecutive years, while Achievers have done so for 10 years. The quickest way to narrow the list down was only include companies with 35 or more years of consecutive dividend increases. This reduced the number of companies to 57.

Ability To Generate Positive Free Cash Flows: To have cash available for dividends, a company must have cash left over after paying the operating expenses and normal capital expenditures. For this I looked for companies that had positive free cash flow for the last 10 years.

Free Cash Flow Sufficient To Pay The Dividend: Free cash flow can be positive, but still not enough to cover an increasing dividend. To ensure adequate coverage, I screened for companies with a 60% or less Free Cash Flow payout ratio.

Low Debt: Dividends paid out of Free Cash Flow must compete for other needs of the business such as interest and debt payments. Lower debt and interest requirements make available more cash for dividend payments. For this item, I eliminated all companies that had a debt to total capital percent in excess of 35%.

Low Risk: An Elite Dividend company should provide a superior return without subjecting your investment to undue risk. For this item, I limited the companies to those with a risk # less than 1.5.

My Elite Dividends List that started with 218 companies, then after considering all the above, it is left with the following nine companies:

		Debt To	FCF	Years of
Company	Yield	Capital	Payout	Div Grow
WW Grainger (GWW)	1.75%	17.99%	22.36%	39
RLI Corp. (RLI)	2.06%	10.53%	5.69%	35
Wal-Mart (WMT)	2.28%	23.88%	36.30%	36
Chubb Corp. (CB)	2.57%	20.16%	19.85%	46
Coca-Cola Co. (KO)	3.06%	16.15%	57.47%	48
P&G (PG)	3.16%	32.69%	31.30%	54
J&J (JNJ)	3.43%	18.62%	38.98%	48
Diebold, Inc. (DBD)	3.62%	34.64%	17.21%	57
Genuine Parts (GPC)	3.77%	15.76%	39.57%	54

This is not a buy list. As noted above, the Elite Dividend List ignores valuation and other factors you must consider before purchasing one of these companies. As we build our dividend growth portfolios, it only makes sense to build its core with the very best stocks.

Full Disclosure: Long WMT, KO, PG, JNJ, GPC. See a list of all my income holdings here.

(Photo Credit)

How Often Should A Stock Pay And Raise Dividends? *

D4L — Fri, 30 Apr 2010 10:30:05 +0000

In the U.S. and Canada, most companies pay dividends quarterly. In other parts of the world, it is not uncommon for companies to pay an annual or a semi-annual dividend. That is not to say that North American companies sometimes choose not to pay quarterly dividends. For many years McDonald’s (MCD) paid an annual dividend. Since 2000, Walt Disney Co. (DIS) has paid an annual dividend and Ruby Tuesday, Inc. (RT) pays a semi-annual dividend. Going in the other direction, Realty Income Corp. (O) and Alpine Total Dynamic Dividend Fund (AOD) pay monthly dividends.

Though I prefer quarterly dividends, there is something more important than frequency — dividend increases. Below are several companies satisfying their shareholders desire for more cash by increasing their dividends:

Travelers (TRV) is a leading provider of commercial property-liability and homeowners and auto insurance. April 23rd the company increased its quarterly dividend to $0.36/share. The dividend is payable June 30, 2010, to shareholders of record as of the close of business June 10, 2010. The ex-dividend date is June 8, 2010. The yield based on the new payout is 2.85%.

Costco Wholesale (COST) operates about 565 membership warehouses in the U.S., Puerto Rico, Canada, the U.K., Taiwan, Japan, Korea, and Mexico. April 23rd the company raised its quarterly dividend 14% to $0.205/share. The dividend of $.205 per share is payable May 21, 2010, to shareholders of record at the close of business on May 7, 2010. The ex-dividend date is May 5, 2010. The yield based on the new payout is 1.39%.

Holly Energy Partners (HEP) operates refined product pipeline and terminal facilities. April 23rd the partnership raised its quarterly distribution to $0.815/unit. The distribution will be paid May 14, 2010, to unitholders of record May 4, 2010. The ex-distribution date is April 30, 2010. The yield based on the new payout is 6.98%.

International Paper (IP) is a leading worldwide producer and distributor of printing papers and packaging products. On April 26th the company increased its quarterly dividend to $0.125/share. The dividend is payable June 15, 2010 to shareholders of record on May 17, 2010. The ex-dividend date is May 13, 2010. The yield based on the new payout is 1.85%.

Alliance Holdings GP, L.P. (AHGP) produces and markets coal primarily to utilities and industrial users in the U.S. It offers a range of steam coal with varying sulfur and heat contents. April 26th the partnership increased its quarterly distribution 2.8% to $0.465/unit. The distribution is payable on May 20, 2010, to AHGP’s unitholders of record as of the close of trading on May 13, 2010. The ex-dividend date is May 13, 2010. The yield based on the new payout is 5.49%.

Community Bank System (CBU) provides financial services in upstate New York, and in northeastern Pennsylvania as First Liberty Bank & Trust. April 26th the company raised its quarterly dividend 9.1% to $0.24/share. The dividend is payable on July 9, 2010, to shareholders of record as of June 15, 2010. The ex-dividend date is June 11, 2010. CBU is a Dividend Achiever and has paid a higher dividend for 17 consecutive years. The yield based on the new payout is 3.89%.

Inergy Holdings (NRGP) operates a retail and wholesale propane supply, marketing and distribution business. April 26th the company increases its quarterly distribution 3.7% to $0.975/unit. The distribution will be paid on May 14, 2010, to unitholders of record as of May 7, 2010. The ex distribution date is May 5, 2010. The yield based on the new payout is 5.31%.

EarthLink (ELNK) is one of the largest U.S. Internet service providers, based on paying subscribers. April 27th the company increases it quarterly dividend to $0.16/share. This increase will be reflected in the next quarterly dividend to be paid on June 28, 2010 to shareholders of record on June 14, 2010. The ex-dividend date is June 12, 2010. The yield based on the new payout is 6.88%.

Williams Partners (WPZ) engages in gathering, transporting, processing, and treating natural gas, as well as fractionating and storing natural gas liquids. April 27th the company increases its quarterly distribution 3.5% to $0.66/unit. The distribution is payable on May 14, 2010, to unitholders of record at the close of business on May 7, 2010. The yield based on the new payout is 6.31%.

IBM (IBM) products and services include information technology services, software, computer hardware equipment, fundamental research, and related financing. April 27th the company raised its quarterly dividend 18% to $0.65/share. The dividend is payable June 10, 2010 to stockholders of record May 10, 2010. The ex-dividend date is May 6, 2010. This is the 15th year in a row that IBM has increased its quarterly cash dividend, and 7th year in a row of double-digit percent increases. With the payment of the June 10th dividend, this Dividend Achiever will have paid consecutive quarterly dividends every year since 1916. The yield based on the new payout is 2.02%.

Sunoco Logistics Partners LP (SXL) owns and operates a group of refined product and crude oil pipelines and terminal facilities. April 27th the company increases its quarterly distribution 2.3% to $1.11/unit. The yield based on the new payout is 6.54%.

WW Grainger (GWW) is the largest global distributor of industrial and commercial supplies such as hand tools, electric motors, light bulbs and janitorial items. April 28th the company raised its quarterly dividend 17% to $0.54/share. April 28th the company raised its quarterly dividend 17% to $0.54/share. The dividend is payable on June 1 to shareholders of record on May 10. The ex-dividend date is May 6. GWW is a Dividend Aristocrat and has paid a higher dividend for 39 consecutive years. The yield based on the new payout is 1.99%. See recent analysis.

Exxon (XOM) is the world’s largest publicly owned integrated oil company. April 28th the company raised its quarterly dividend 4.8% to $0.44/share. The dividend is payable on June 10, 2010 to shareholders of record of Common Stock at the close of business on May 13, 2010. XOM is a Dividend Aristocrat and has paid a higher dividend for 28 consecutive years. The yield based on the new payout is 2.54%.

Chevron (CVX) is a global integrated oil company that has interests in exploration, production, refining and marketing, and petrochemicals. April 28th the company increased its quarterly dividend 5.9% to $0.72/share. The dividend is payable June 10, 2010, to holders of common stock as shown on the transfer records of the Corporation at the close of business on May 19, 2010. The ex-dividend date is May 17. The amount represents a 5.9 percent increase in the company’s quarterly dividend. CVX is a Dividend Achiever and has paid a higher dividend for 23 consecutive years. The yield based on the new payout is 3.37%.

Sturm, Ruger & Co. (RGR) designs, manufactures, and sells firearms to domestic customers; it offers products in four industry product categories: rifles, shotguns, pistols, and revolvers. April 28th the company raised its quarterly dividend 55% to $0.093/share. The dividend will be paid on May 28, 2010 to stockholders of record as of May 14, 2010. The ex-dividend date is May 12, 2010. The yield based on the new payout is 2.16%.

TransAlta Corp. (TAC) is an independent power producer and wholesale marketing company owns a portfolio of generation assets in Canada, the United States, Mexico, and Australia. April 29th the company increased its quarterly dividend to $0.29/share. The dividend is payable July 1, 2010 to shareholders of record at the close of business June 1, 2010. The ex-dividend date is May 28, 2010. The yield based on the new payout is 5.59%.

Cullen/Frost Bankers (CFR) is the largest multi-bank holding company headquartered in Texas, has more than 80 offices in various cities in the state. April 29th the company increases its quarterly dividend 4.7% to $0.45/share. The dividend is payable June 15, 2010 to shareholders of record on June 1, 2010. The ex-dividend date is May 28, 2010. CFR is a Dividend Achiever and has paid a higher dividend for 16 consecutive years. The yield based on the new payout is 3.02%.

Duff & Phelps (DUF) is an independent financial advisory company operates worldwide in two segments, Financial Advisory and Investment Banking. April 29th the company raised its quarterly dividend by 20% to $0.06/share. The yield based on the new payout is 1.50%.

Frequency of dividends increases is one of the most important things to consider when adopting a dividend growth investment strategy. For a list of stocks with a long string of consecutive cash dividend increases, see this list.

Full Disclosure: Long MCD, AOD, CVX, O, PG, JNJ. See a list of all my income holdings here.

(Photo Credit)

Seven Stocks Expected to Grow Their Dividends in 2010 *

D4L — Thu, 31 Dec 2009 11:30:51 +0000

In this space we normally look at companies that have recently raised their dividends. However, as the year draws to a close there were very few companies of note increasing their dividends this week. With that, I thought it would be interesting to see who might be the big dividend raisers in 2010. Here are seven companies for your consideration:

Procter & Gamble Co. (PG) in April 2009 raised its dividend 10% to $0.44/share from $0.40/share. PG has increased its dividend for 53 consecutive years and I expect them to do so again next year. 2010′s increase may not be as strong since 2009′s free cash flow was down 8.5% from 2008. However, it is still strong and the trailing 12-months is above the 2008 level. Also, PG’s 2009 share count is down in and its cash balance is up. Given this, I project a 2010 increase of 6-8%. The stock is currently yielding 2.9%. [Analysis]

Colgate-Palmolive Co. (CL) in April 2009 also raised its dividend 10% to $0.44/share from $0.40/share. CL has increased its dividend for 46 consecutive years and I expect them to do so again next year. The 2010 increase should be higher then 2009′s since the company’s 12-month trailing free cash flow is up over 41% compared to 2008. The company’s most recet cash balance is up 52% and shares outstanding are down. I project a 2010 increase of 10-12%. The stock is currently yielding 2.1%.

W.W. Grainger Inc. (GWW) in May 2009 raised its dividend 15% to $0.46/share from $0.40/share. GWW has increased its dividend for 38 consecutive years and I expect them to do so again next year. The 2010 increase could be higher since the company’s 12-month trailing free cash flow is up over 62% compared to 2008 and its most recent cash balance is up nearly 70%. I project a 2010 increase of 15-17%. The stock is currently yielding 1.8%. [Analysis]

Abbott Laboratories (ABT) in April 2009 raised its dividend 11% to $0.40/share from $0.36/share. ABT has increased its dividend for 37 consecutive years and I expect them to do so again next year. The 2010 increase should be similar to the 2009 increase since the company’s 12-month trailing free cash flow is down slightly (2%) compared to 2008, but it is currently sitting on 18% more cash. I project a 2010 increase of 10%. The stock is currently yielding 2.9%. [Analysis]

Wal-Mart Stores Inc. (WMT) in March 2009 raised its dividend 15% to $0.2725/share from $0.2375/share. WMT has increased its dividend for 35 consecutive years and I expect them to do so again next year. This cash generating machine continues to hum with a 10% increase (12-month trailing) in free cash flow compared to 2008. The more impressive statistic is the 12-month trailing cash flow is 2.4 time higher than the 2008 amount. I project a 2010 increase of 10%. The stock is currently yielding 2.0%. [Analysis]

Walgreen Company (WAG) in August 2009 raised its dividend 22% to $0.1375/share from $0.1125/share. WAG has increased its dividend for 34 consecutive years and I expect them to do so again next year. This is another cash generating machine that saw a 2009 free cash flow increase of 168% compared to 2008 and the 2009 ending cash balance is 4.7 time higher than 2008′s. I project a 2010 increase of 15-20%. The stock is currently yielding 1.5%. [Analysis]

AFLAC Inc. (AFL) in February 2009 raised its dividend 17% to $0.28/share from $0.24/share. AFL has increased its dividend for 27 consecutive years and I expect them to do so again next year. In spite of all the negative publicity aimed at the financial sector, AFL’s free cash flow has grew approximately 15% the last 12 months compared to 2008 and its most recent cash balance has nearly doubled from the 2008 level. I project a 2010 increase of 10%. The stock is currently yielding 2.4%. [Analysis]

Obviously, the above increases are pure speculation on my part. But in a world where cash is king, somehow great companies always find a way to increase their dividends each year.

Full Disclosure: Long ABT, AFL, PG, WMT. See a list of all my income holdings here.

(Photo Credit)

IBM Assumes Familiar Leadership Role *

D4L — Fri, 01 May 2009 10:30:26 +0000

IBM (IBM), a name once synonymous with blue-chip technology, faced a near-death experience in the early 1990′s when it misjudged the importance of PCs at a time when demand for mainframes was waning and corporate downsizing was in full swing. IBM has never been able to regain it technology bellwether crown from Microsoft (MSFT) and Intel (INTC), but it has taken steps to regain its leadership role.

Last Tuesday, IBM stood up and was counted as a leader. At a time when the ill-prepared and the fearful are cutting dividends and hoarding cash, IBM increased its quarterly dividend 10% to $0.55/share and announced a $3 billion share repurchase program. The company has increased its quarterly dividend by 175% percent since 2006 and this is the 14th consecutive increase. The dividend is payable June 10, 2009 to stockholders of record May 8, 2009. based on the new rate, IBM is currently yielding: 2.10%

Below are many other companies joining IBM as leaders andrewarding their shareholders with higher cash dividends:

Cullen/Frost Bankers (CFR) increased its qtr. dividend 2% to $0.43/share. Yield 3.54% (analysis)
Donegal Group (DGICA) raised its qtr. dividend to $0.112/share. Yield: 3.07%
Valmont Industries (VMI) ups its qtr. dividend 15.4% to $0.15/share, Yield: 0.95%
Bemis (BMS) boosts qtr dividend to $0.225/share. Yield: 3.72%
Costco Wholesale (COST) increased its qtr dividend to $0.18/share. Yield: 1.50%
BOK Financial (BOKF) raised its qtr. dividend 6.7% to $0.24/share. Yield: 2.48%
W.W. Grainger (GWW) ups its qtr. dividend 15% to $0.46/share. Yield: 2.22%
Talisman Energy (TLM) boosts its semi-annual dividend 12.5% to $0.1125/share. Yield: 1.47%
ExxonMobil (XOM) increased its qtr. dividend to $0.42/share. Yield: 2.45%
UGI Corporation (UGI) raised its qtr dividend 4% to $0.20/share. Yield: 3.35%
Safeway (SWY) ups qtr. dividend 21% to $0.10/share. Yield: 1.56%
Occidental (OXY) boosts qtr. dividend 3.1% to $0.33/share. Yield: 2.23%

Hopefully, this is just the beginning and in the coming weeks we will continue to see more dividend increases. For more companies with a long string of consecutive dividend increases, see this list.

Full Disclosure: No position in the aforementioned securities. See a list of all my income holdings here.

(Photo: Steve Woods)

WW Grainger Inc. (GWW)

D4L — Mon, 01 Oct 2007 06:00:23 +0000

Last Updated: 8-29-2009

Description: WW Grainger Inc. (GWW) is a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index. The Company is the largest global distributor of industrial and commercial supplies, such as hand tools, electric motors, light bulbs, and janitorial items.

Quantitative Stock Analysis:
GWW-Analysis.PDF

Comments:
GWW has a excellent record of growing both earnings and dividends. In the near-term GWW will likely face tough markets due to slow economic conditions. Long-term initiatives to enhance their distribution should help the company increase market share. Risks include economic conditions, pricing pressures and an adverse ruling from the Department of Justice related to compliance issues on a U.S. government contract.

Share Data:
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Historical Dividend Information

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