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The Recently Recommended Monthly Stock Special
Recently Recommended

The recently recommended company is *Genuine Parts Co. (GPC)

Company Information:

Its current total market capitalization of $13.8 billion makes GPC a large capitalization stock (a large-cap stock has a market capitalization value of more than $10 billion) and its long history of consistent earnings growth and dividend payments makes it a solid company. It is considered a well-diversified business with a durable competitive advantage over its rivals, which also enjoys a solid corporate culture. According to Yahoo! Finance, consensus estimates call for the company to earn about $5.69 per share this year, up from $5.68 per share last year, and to go to about $5.99 per share next year. Genuine Parts Co. has paid dividends to investors since 1948, and has increased its payments for 62 consecutive years, which makes it a dividend aristocrat. During the past five years it has increased its dividends at an average rate of 5.9%, and its quarterly payment of $0.76 per share currently provides a yield of 3.14%.

 

The value of dividends reinvestment: A hypothetical investment in Genuine Parts Co. has grown cumulatively (including dividends reinvested) 5,543.28% during the past forty years. The same investment has grown only 1,919.25% in the same period of time, excluding dividends. The stock exhibits a healthy Dividend Payout Ratio (DPR is the proportion of earnings paid out as dividends to shareholders) of 56.0%, which means the company is paying out 56.0% of all its net income in dividends, and is retaining a large percentage of earnings to reinvest or grow the business. Its average DPR during the past five years is also 56%. Its Price to Earnings ratio (P/E --a measure of valuation) of 18.1 is 10.8% below the S&P 500® index. Its Price to Sales ratio of 0.75 is 64.3% below the index.

 

Technically (from the chart’s perspective) GPC also looks attractive, trading 18.2% below its 52 weeks high, while it is forming a long base between $87 and $115 approximately, in which $87 is acting as a technical support level. The index funds Vanguard Total Stock Market Index and Vanguard Mid Cap Index are major shareholders of GPC, holding 2.7% and 2.4% of its shares respectively. The stock is one of the 63 holdings of the mutual fund managed by Moneypaper Advisors, the MP 63 Fund (DRIPX). GPC’s main competitors are Advance Auto Parts Inc. (AAP) and AutoZone Inc. (AZO).

 

Best and worst years during the past 40 years: Its best year was 1982, in which GPC returned, including dividends, 44.8%. On the flip side, its worst year was 1999, when the stock declined 25.8% including dividends. GPC’s Beta (a measure of the volatility, or systematic risk in comparison to the market as a whole as evidenced by the S&P 500 Index) is 0.86, so the stock is 14% less volatile than the Market. Its dividend re-investment plan charges very low fees for cash investing ($8 cents per share), and for selling (8 cents per share). To illustrate those fees: for example, a $100 investment at GPC’s current price would cost a fee of 8 cents or 0.08% of the investment). The plan charges no fees for dividend reinvestment, safekeeping or termination of the plan. With the stock being fundamental and technically attractive, this company is an appropriate holding for investors who wish to build a holding over the long term.

 

Disclosure: Mario Medina has no position in Genuine Parts Company, and has no plans to initiate any position in the immediate future. However, the author is the co-manager of the MP 63 Fund (DRIPX), which does hold a position in the company. The author wrote the article himself and it expresses his own opinions. The author has no business relationship with GPC and this article is not intended as a recommendation to invest as the information published does not take into account any subscriber's personal finances, goals or risk tolerance. Accordingly, you should be aware of all the risks associated with any financial investment, and should consult an independent financial advisor for any personal investment advice.

 

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