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When it comes to dividend stalwarts, certain names instantly spring to mind. Namely, Coca-Cola and Procter & Gamble. Yet there’s a high-yield, reliable income investment that often flies under the radar.
Genuine Parts Company ($GPC) is a Dividend King that has raised its payout for 70 consecutive years.
The company is a leading distributor of automotive and industrial replacement parts, operating through well-known brands such as NAPA Auto Parts. GPC operates in 17 countries across North America, Australasia, and Europe. NAPA, the company’s retail subsidiary, has roughly 6,000 stores in the U.S. alone.
GPC’s other subsidiary, Motion, is a major distributor of industrial parts and serves more than 170,000 customer accounts.
This is a large, essential business that keeps cars on the road and factories operational. However, unlike Coca-Cola, Genuine Parts Company is not a recognizable consumer brand. As a result, many investors either overlook the stock or misunderstand it, assuming GPC is solely an auto parts retailer.
GPC has paid a cash dividend every year since going public in 1948, and the company itself predates the Great Depression.
This is a resilient business that’s been through it all. GPC has survived wars, recessions, hyper-inflation, and political instability. And throughout all this, the company has continued to reward its shareholders.
From a valuation standpoint, the stock is not particularly expensive. GPC trades at a price to earnings ratio of 14.84.
That said, the company has underperformed the broader market in recent years, delivering a lackluster 10-year average annual total return of 5.47%.
Over longer 20- and 30-year periods, however, GPC has consistently delivered average annual total returns of roughly 8%. While not exceptional, this is still respectable for a legacy industrial business.
Genuine Parts Company is also a steady dividend growth stock. Shares currently yield 3.60%, backed by 70 years of uninterrupted dividend increases. The payout ratio is a safe 55.83%, and the 5-year compound annual dividend growth rate is 5.45%. Not an inflation-beater, but still a steady source of dependable income.
Recently, the company announced plans to separate its automotive and industrial segments into two independently traded businesses.
This news tanked GPC’s share price and the stock is actually down more than 12% over the last five trading days. As somebody who has followed this stock for some time, I’ve personally noticed a pattern where Genuine Parts Company sells off hard on bad news — the stock dropped from over $140 per share to $110 due to tariff concerns last year — only to rally again.
Spin-offs often perform poorly during their initial years as standalone businesses, but these investments tend to come into their own and often deliver strong returns for shareholders who hold on — both Warner Bros. Discovery and Jackson Financial instantly spring to mind,
Genuine Parts Company isn’t a market-beating investment, but it is in the midst of a major sell-off.
This is a well-run business that’s navigated many tough economic cycles before, and the spin-off could provide heightened returns if both the parent company and the nascent standalone stage a rally.
With a 3.60% yield and potential rebound upside, I’m interested in adding GPC to my portfolio.
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Disclaimer: This article is for entertainment purposes only. It is not financial advice, always do your own research.
