5. Genuine Parts Company (NYSE:GPC)
Number of Hedge Fund Holders: 36
Dividend Yield as of July 23: 2.93%
Genuine Parts Company (NYSE:GPC) is a Georgia-based industrial supplies company that specializes in automotive and industrial replacement parts. a global leader in distributing automotive and industrial parts. Generally, the company’s two business segments—automotive and industrial—work together like a perfect balance, with one segment compensating for the other’s performance during cyclical fluctuations. However, this hasn’t been the case in its most recent quarter. In its recently-announced Q2 2024 earnings, the results indicate weaker-than-expected market conditions, which have dampened demand, especially in the Industrial and U.S. and European Automotive segments. The company reported global Automotive sales of $3.7 billion, marking a 2.0% increase from the same period in 2023. This growth included a 3.1% boost from acquisitions, which was partially offset by a 0.6% decline in comparable sales and a 0.5% negative impact from foreign currency and other factors. Segment profit was $314 million, down 4.7%, with a profit margin of 8.4%, which is 60 basis points lower than the previous year.
Despite this, Genuine Parts Company (NYSE:GPC) is well-positioned to benefit from the steady demand for replacement parts, which is fueled by the increasing cost of new cars. With fewer people in the U.S. able to afford new vehicles due to higher interest rates and supply chain issues driving up prices, the demand for replacement parts remains strong.
In addition, Genuine Parts Company (NYSE:GPC) is also strong from a dividend point of view because of its cash generation. In the first six months of 2024, the company reported an operating cash flow of $612 million and its free cash flow amounted to $353 million. Moreover, it returned $272 million to shareholders through dividends. The company has paid regular dividends to shareholders over the past 76 years and maintains a 68-year track record of consistent dividend growth. The company offers a quarterly dividend of $1.00 per share for a dividend yield of 2.93%, as of July 23.
In addition to a strong dividend history, Genuine Parts Company (NYSE:GPC) has an attractive valuation, currently trading at a forward P/E ratio of 14.01. The stock appears relatively inexpensive compared to competitors such as Autozone Inc (NYSE:AZO) and O’Reilly Automotive Inc (NASDAQ:ORLY), which have forward P/E ratios of 17.86 and 25.32, respectively, and do not pay dividends to shareholders. This makes GPC an attractive option for investors seeking exposure to a growing market while also receiving consistent dividend income.
At the end of March 2024, 36 hedge funds in Insider Monkey’s database held stakes in Genuine Parts Company (NYSE:GPC), unchanged from the previous quarter. Their positions have a consolidated value of nearly $700 million.
