Genuine Parts (NYSE:GPC) Is Increasing Its Dividend To $1.00

Genuine Parts Company (NYSE:GPC) will increase its dividend from last year's comparable payment on the 1st of April to $1.00. This will take the annual payment to 2.7% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Genuine Parts

Genuine Parts' Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Genuine Parts' dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share is forecast to rise by 18.9% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 36%, which is in the range that makes us comfortable with the sustainability of the dividend.

Genuine Parts Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $2.15 in 2014, and the most recent fiscal year payment was $4.00. This implies that the company grew its distributions at a yearly rate of about 6.4% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Genuine Parts has grown earnings per share at 13% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

We Really Like Genuine Parts' Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Genuine Parts that investors should know about before committing capital to this stock. Is Genuine Parts not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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