The FiveTwenty portfolio received $102.77 in dividends in the past week. ABBV and PG paid their quarterly dividend during the week.
|Past Week Dividend||$102.77|
|Current Quarter Dividend (Q1 2022)||$448.58|
|Estimated Annual Dividend||$4,408.51|
The capital allocation for the week of 02/20/2022 to 02/26/2022 will be used to establish a position in Genuine Parts Co (NYSE: GPC).
GPC – Company Profile
The Genuine Parts Company (GPC) distributes automotive replacements parts, and industrial replacement parts and materials. The company has a distribution network of over 3600 location spread across the globe. In North America it is best know for its NAPA AUTOPARTS chain of retail stores. Official Site | Wikipedia
|Dividend Streak||66 years|
|Payout Ratio||47.17%* (GAAP 57.46)|
|P/E||18.36* (GAAP 20.33)|
* computed using TTM adjusted EPS of $6.91 as of Q4 2021
Does GPC have the financial means to sustain and raise its dividend going forward?
Over the last decade, GPC has been able to consistently grow revenue. On the other hand, net income has been more of a mixed bag. While the company has seen an increase in net income over the decade, the rate of growth has lagged that of revenue. The COVID-19 pandemic had a significant impact on GPC’s operations and financial performance. Revenue, net earnings and EPS all declined in 2020 compared to the previous year.
As is to be expected, GAAP EPS shows the same trends as GAAP net income. However, adjusted EPS has grown more consistently. This is an encouraging sign that suggest that GPC is able to grow its revenue profitably.
The average dividend per share growth rate was 6.70% per year in the past 10 years and 5.40% per year in the past 3 years. (per GuruFocus). On 02/14/2022 the company announced a 10% increase in its quarterly dividend starting with the Q1 2022 payout. In addition, GPC has managed this dividend growth rate while keeping the payout ratio on adjusted EPS of between 47% and 59%.
GPC in 2021 and beyond
Following an FY 2020 that saw significant impacts due to the COVID-19 pandemic, GPC posted a strong FY 2021. Revenues increased 14.1% to $18.9 billion, adjusted net income increased 30.3%, and adjusted EPS were 31.1% higher compared to FY 2020. Additionally, GPC improved its segment profit margin by 60 basis points and returned $800 million to shareholders via cash dividends and share repurchases during the year.
Looking ahead, the company expects revenue growth of 9% to 11% and adjusted EPS of $7.45 to $7.60 in FY 2022.
Are we paying too much for GPC at the current share price?
For the last decade, GPC has seen a year-end PE ratio low of 13.87 and a high of 392.53, with a median of 19.52. (per GuruFocus) The current adjusted PE ratio computed on TTM adjusted EPS of 18.36 and PE ratio computed on GAAP EPS of 20.33 are close to the historic media.
The current stock price of $126.86 is 5.3% below the 50-day moving average and 2% below the 200-day moving average. The price is also close to the 20th percentile of the 52 week range.
How does the current dividend yield compare to historical values?
Over the last 10 years, the yield has fluctuated between a low of 2.13% and a high of 5.56%, with a median of 2.84%. (per GuruFocus) The current TTM yield of 2.57% is below the median. However, the MRD yield following the dividend increase for Q1 2022 of 2.82% right about the median value.
Why are we adding GPC to the FiveTwenty portfolio?
GPC sports a current streak of 65 consecutive years of dividend increases. In addition, GPC is a defensive stock with a long track record of carefully managing its dividend payout. The company grows its earnings at a moderate yet steady rate. And, while it does experience earnings declines during recessions, it does still perform relatively well. The latest such example is the company’s performance during the COVID-19 pandemic.
Photo by Robert Laursoo on Unsplash