While researching the iShares Dow Jones Select Dividend Index ETF (NYSE:DVY) I came across a company that practically defines consistency. Genuine Parts Company (NYSE:GPC) has been in business since 1928, and it has has increased revenue every year since its inception with the exception of 1947, 1949 and 2001. In fact, it's been so consistent, it has paid a dividend every year since going public in 1948, and 2008 will be the 52nd consecutive year increasing its dividend. (For more read The Importance Of Dividends and The Power of Dividend Growth.)

Glamorous it Isn't
With 80 years distribution experience, Genuine is in position to meet its customers' needs. The company distributes automotive replacement parts, industrial parts, office products and electrical/electronic materials. Its approximately 32,000 employees operate four divisions: Napa Auto Parts (Automotive), Motion Industries (Industrial), S.P. Richards (Office Products) and EIS (Electrical).

Genuine Parts was originally an automotive parts company. Its diversification process began over 30 years ago; today, Genuine Parts is a $10.8 billion company with operations throughout North America. Napa Auto stores now account for just 49% of revenue, Motion Industries another 31%, SP Richards 16% and EIS the remaining 4%. Times have certainly changed.

Business Is Steady
Sales were up 4% in 2007 to $10.84 billion. Income before taxes was up 6% to $817 million and diluted earnings per share up 8% to $2.98. That was more than enough to pay the $1.46 dividend. While its sales growth in 2007 was below its target of 6%-8%, there were a couple of bright points: Motion Industries sales were up 8% and EIS 7%. Even the automotive division, despite a horrible auto industry, eked out a 2% increase. Only the office products business saw a decline in its numbers, down by 1%. Management believes both the automotive and office products divisions, although struggling, will show improvement in the second half of the year. An 80-year track record says don't bet against the company.

Slow, Consistent Growth
In the past five years, Genuine Parts' sales have grown from $8.5 billion in 2003 to $10.8 billion in 2007, while income before taxes increased $245 million to $817 million in 2007.

Every division has seen gains. The auto parts group sales went from $4.48 billion in 2003 to $5.31 billion in 2007, Motion Industries from $2.25 billion to $3.35 billion in 2007, office products from $1.46 billion to $1.77 billion in 2007 and EIS sales went from $298 million in 2003 to $436 million in 2007. Small gains to be sure. However, slow and steady wins the race.

Its stock has split 10 times in the past 60 years as a public company. One share in 1948 today is worth 205 shares. Its last split was in April 1997. Even more importantly, its dividend in the past 10 years is up 56 cents, or 56%, from $1.00 in 1998 to $1.56 in 2008. I'm impressed, but the market isn't. (Find out more on financial reports in Advanced Financial Statement Analysis.)

Could the Market Be Wrong?
Genuine Parts stock is down about 10% in the past 52-weeks. In the five years up to 2007 fiscal year end, total shareholder return trailed both the S&P 500 and Peer Index. Peer index is made up of various companies which compete with Genuine Parts' segments, and accounts for reinvested dividends. What gives?

Here you have consistency-plus and the market totally disregards the achievement. It doesn't seem to matter that at the end of 2007, debt was $500 million, just 15.5% of total capitalization. In addition, free cash flow was $283 million and that's after repurchasing five million shares, spending $116 million in capital expenditures and returning $243 million in dividends. But this is not enough says Mr. Market.

Even increasing sales in the second quarter by 4% to $2.87 billion and EPS 7% to 81 cents doesn't seem to matter. What about the dividend, it's currently yielding about 3.6%; shouldn't that budge the stock price? Apparently, none of this matters. It seems boring has no place in investing.

Bottom Line
Zacks gives it a 'hold' and a target price of $43. Despite expanding product lines, penetrating new markets and making lots of acquisitions, not to mention diversifying to avoid reliance on one business, the office products and automotive parts are a drag on growth. Until things improve, Zacks won't guide higher.

I tend to disagree. With revenue growth in the 3-5% range for 2008, it compares favorably with both Sara Lee (NYSE:SLE) and Kimberly-Clark (NYSE:KMB), two other consumer goods stocks in the iShares ETF discussed earlier. If you want consistency, Genuine is a good place to start.

Related Articles
  1. Mutual Funds & ETFs

    Top 3 Japanese Bond ETFs

    Learn about the top three exchange-traded funds (ETFs) that invest in sovereign and corporate bonds issued by developed countries, including Japan.
  2. Mutual Funds & ETFs

    What Exactly Are Arbitrage Mutual Funds?

    Learn about arbitrage funds and how this type of investment generates profits by taking advantage of price differentials between the cash and futures markets.
  3. Savings

    Become Your Own Financial Advisor

    If you have some financial know-how, you don’t have to hire someone to advise you on investments. This tutorial will help you set goals – and get started.
  4. Investing News

    Ferrari’s IPO: Ready to Roll or Poor Timing?

    Will Ferrari's shares move fast off the line only to sputter later?
  5. Investing Basics

    6 Reasons Hedge Funds Underperform

    Understand the hedge fund industry and why it has grown exponentially since 1995. Learn about the top six reasons why the industry underperforms.
  6. Mutual Funds & ETFs

    Top Three Transportation ETFs

    These three transportation funds attract the majority of sector volume.
  7. Stock Analysis

    5 Cheap Dividend Stocks for a Bear Market

    Here are five stocks that pay safe dividends and should be at least somewhat resilient to a bear market.
  8. Investing Basics

    Tops Tips for Trading ETFs

    A look at two different trading strategies for ETFs - one for investors and the other for active traders.
  9. Investing

    How to Win More by Losing Less in Today’s Markets

    The further you fall, the harder it is to climb back up. It’s a universal truth that is painfully apparent in the investing world.
  10. Fundamental Analysis

    Use Options Data To Predict Stock Market Direction

    Options market trading data can provide important insights about the direction of stocks and the overall market. Here’s how to track it.
  1. Can mutual funds invest in IPOs?

    Mutual funds can invest in initial public offerings (IPOS). However, most mutual funds have bylaws that prevent them from ... Read Full Answer >>
  2. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  3. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  4. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  5. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  6. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!