Genuine Parts Company (NYSE:GPC)

Founded in 1928, Genuine Parts Company is based in Atlanta, Georgia and employs 31,700 people. It specializes in replacement parts for cars and other industrial machinery. The Automotive Parts Group (NAPA), GPC's largest division, distributes more than 380,000 products through its 64 distribution centers throughout the United States. It also consists of NAPA Canada / UAP Inc., a leading distributor of automotive parts in Canada, as well as Auto Todo, one of the largest automotive sales organizations in Mexico. They also own the Canadian heavy-duty parts distributor TW Distribution (owned by UAP), and the automotive aftermarket parts importer-distributor Altrom.

GPC also consists of the Birmingham, Alabama-based Industrial Parts Group, which operates as Motion Industries and distributes more than three million items throughout the United States and Canada. The Office Products Group distributes more than 50,000 commercial products from 45 distribution centers throughout the United States and Canada, under the SPRichards name, to thousands of dealers, including independent mass merchandisers, mail order distributors and Internet distributors. The Electrical/Electronic Materials Group, operating as EIS Inc., is one of North America's leading distributors of industrial materials and supplies.

GPC offers a current yield of 2.8%, which is still reasonable considering the current market valuation and the very strong increase in the share price since 2009. The average yield over the last few years is obviously higher, at 3.87%. The annual dividend growth is interesting, at 7.37%, but what is especially remarkable is that The company has grown its distributions for 56 consecutive years. The most recent dividend increase was on March 6th with an increase of 8,59%. Over the next five years it should increase at an average annual rate of 6,76%. The company applies a prudent dividend payment policy, since currently it only represents 48,84% of the profit.

Genuine Parts Co.'s industry is unique because it is primarily industrial in nature and heavily tied to the automotive industry. This translates into a volatility of 23.59%, which we are not necessarily used to among dividend payers with increasing dividends. But on the other hand, since it is a replacement part company, GPC is less sensitive to the economic fluctuations that automakers typically experience. This gives us a very reasonable beta of 0.74. If you are worried about your job, you postpone buying your car for a few years, and therefore have to resort to spare parts. So there can even be a counter-cyclical effect with this type of company, as we can see between 1997 and 2002, when GPC moved in the opposite direction of the market.

Opening up to the Mexican and Canadian markets allows GPC to free itself from currency risk. Thus, the decline of the dollar tends to be beneficial for the company, which translates into a rise in the share price in CHF. The $risk of -0.30 reflects this state of affairs.

GPC ultimately receives 3 stars, which is a good risk/return ratio. The yield remains attractive despite the soaring prices and, above all, the growing dividends can boast a great track record, coupled with a prudent distribution ratio. The stock also offers good protection against fluctuations in the dollar. The only real downside is the volatility, which is still very high for a payer of growing dividends. So handle it with great care if you are not used to this type of stock or have weak nerves...

Sources: Wikinvest, Wikipedia, Yahoo Finance, Swissquote, dividends.ch