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Genuine Parts Company: A Genuine, Yet Not Cheap, Opportunity Among Kings

Jun. 13, 2020 7:40 AM ETGenuine Parts Company (GPC) Stock11 Comments
The Dividend Guy profile picture
The Dividend Guy


  • GPC is a Dividend King (50+ consecutive dividend increases) with 37,500 employees across 2,600 sites.
  • You may think you missed GPC’s rally, but it’s still a good time to add this Dividend King.
  • If you are afraid of a second wave, this is the type of holding you want in your portfolio.
  • Looking for a helping hand in the market? Members of Dividend Growth Rocks get exclusive ideas and guidance to navigate any climate. Get started today »

As the market has basically recovered as of June 5th, it seems there are fewer opportunities for investors. Some see the recent market rally as being a party created by the Fed. Sooner or later, those Wall Street partyers will wake up with a big headache.

If you are worried about what may come this fall (bad earnings, second virus wave, stronger recession than expected, etc.), but you still are searching for decent sources of income for your portfolio, I'd like to suggest you take a close look at Genuine Parts (NYSE:GPC). This dividend king (50+ years with consecutive increases) has seen many other recessions and its business model has been proven more than efficient. Plus, GPC hasn't fully recovered from the most recent crash, so in the scheme of things, the security might be available at bargain prices.

Understanding the Business

Founded almost 100 years ago (1928), GPC has positioned itself as one of the top distributors of automotive (57%) and industrial parts (34%). The company is well-known for its famous Napa auto part stores where all good DIY customers and mechanics get the parts they are looking for. GPC is virtually everywhere in the U.S. through its 5,900 Napa stores offering a wide distribution network from coast to coast.

Source: GPC covid-19 presentation

GPC is known to have grown by acquisitions. The company has a ferocious appetite for acquiring small players in their highly fragmented markets. This is how it has posted sales increases 94.5% of the time and has increased its profit in 81.5% of its 92 years of existence.

Growth Vectors

Source: YCharts

The company's recipe to post consistent revenue increases is based on a single ingredient: acquisition.

Source: Investor presentation

There is a natural consolidation in both automotive and industrial parts as clients are looking

Many investors focus on dividend yield or dividend history. I respectfully think they’re making a mistake. While both metrics are important, aiming at companies that have and show the ability to continue raising their dividend by high single-digit to double-digit numbers will make your portfolio outperform others. When a company pushes its dividend so fast, it’s because it is also growing their revenues and earnings. Isn’t this the fundamental of investing – finding strong companies that will grow? If you are looking for a great combination of dividend and growth, check out Dividend Growth Rocks.

This article was written by

The Dividend Guy profile picture
My name is Mike and I’m the author of The Dividend Guy Blog & The Dividend Monk along with the owner and portfolio manager here at Dividend Stocks Rock (DSR). I earned my bachelor degree in finance-marketing, own a CFP title along with an MBA in financial services. Besides being a passionate investor, I’m also happily married with three beautiful children. I started my online venture to educate people about investing and to be able to spend more time with my family. I started my career in the financial industry back in 2003. I earned several promotions along with a good pile of diplomas. I had lots of fun working with clients in private banking for half a decade, but thought I could do more with my life. In 2016, I decided to take a leap of faith and left everything behind to travel across North America and Central America with my family. We drove through nine countries and stayed three months in Costa Rica before returning home. This was an eye-opening adventure that led me in 2017 to quit my job in the financial industry and pursue my dream; helping others with their personal finance through my investing websites. You just found the reason why I quit my suit & tie job!

Analyst’s Disclosure: I am/we are long GPC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I do hold shares of GPC in my DividendStocksRock portfolios. The opinions and the strategies of the author are not intended to ever be a recommendation to buy or sell a security. The strategy the author uses has worked for him and it is for you to decide if it could benefit your financial future. Please remember to do your own research and know your risk tolerance.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (11)

MyPrivilegeIsShowing profile picture
What will increased use of electric vehicles do to the stock? I know that a Tesla has things like shock absorbers that wear out, but it does not have engine parts that wear out
This is an interesting, but still unanswered question. How will GPC do business with electric cars?

Don't be fooled by the hype about EV's. There are plenty of parts that will wear out, get damaged, fail. And, at least for quite some time, they will be extremely expensive due to limited volume and hence competition and production.
Retired Fernando profile picture
EVs have plenty of electronic components which do not last forever. EVs crash and parts (which are very expensive) breaks down and needs to be replaced. Also batteries (very expensive as well) need to be replaced open up a new market for GPC. In addition, there are coming also hybrids vehicles which need much more maintenance... and GPC has many years ahead to adapt itself. I see no problem for GPC.
GPC has long been a favorite of mine, and have held it for years. Always open to considering adding to the position (under the "right" circumstances).

Retired dividend-growth investor
Can never go wrong with a dividend king. GPC, with a 3.6%, yield a solid company for many years good long term stock.
BM Cashflow Detective profile picture
$GPC is the type of stock that I am more than happy to have in my portfolio, no matter what type of wave is coming. I agree with the author. Now is a good time to buy. Before the new wave of buying euphoria comes that hardly any investor expects due to the current pessimism consensus. Now is the time to own as many shares as possible. Thank you.
Long GPC and was thrilled to grab a bucket full during the slump. Would love to grab some more.
InvestRite#1 profile picture
Watching to buy after Q2/2020 earnings, thanks for the report
The Dividend Guy profile picture
A little more volatility will certainly help to get a better price!
Anyhow, GPC will survive the pandemic and continue to pay a steady dividend.
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