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In a series of articles, Bob Ciura counts down his current five top "Buy & Hold Forever" dividend stocks. The editor of Sure Dividend begins with his review of Genuine Parts Co. (GPC).

We believe income investors should focus on quality dividend stocks. Dividend growth stocks have shown the ability to generate superior returns over the long-run. For this reason, we recommend income investors consider high-quality dividend stocks that have a demonstrated ability to raise their dividends each year, even during recessions.

Genuine Parts is a Dividend King with a solid yield, consistent dividend growth, and high expected returns in the coming years. The Dividend Kings are a group of 53 stocks that have each raised their dividends for at least 50 consecutive years.

Genuine Parts Company was founded in 1928 and since that time, it has grown into a sprawling conglomerate that sells automotive and industrial parts, electrical materials, and general business products. Its global span reaches throughout North America, Australia, New Zealand, and Europe and is composed of more than 3,000 locations.

Recent Events

Genuine Parts posted first quarter earnings on April 18, and results were mixed. Adjusted earnings per share came to $2.22, which was six cents better than expected. Net income was off from $304 million to $249 million year over-year. Revenue was flat year-over-year at $5.8 billion, and missed estimates by $40 million.

The sales result was attributable to a 1.9% benefit from acquisitions, offset by a 0.9% decline in comparable sales, as well as a 0.7% headwind from the impact of forex. The company expects just under $10 in EPS for this year.

Growth Prospects

We are forecasting 6% annualized EPS growth for the next five years for Genuine Parts. There should be several drivers of this growth. First, we expect positive organic sales in the core Automotive segment.

Consumers are holding on to their cars longer and are increasingly making minor repairs to keep cars on the road for longer. As average costs for vehicle repair increase when a car ages, this directly benefits Genuine Parts. According to the company, vehicles aged six years or older now represent over about 70% of cars on the road.

Valuation & Expected Returns

Future returns will consist of the stock’s EPS growth, changes in the valuation multiple, and dividends. Genuine Parts now trades for 14 times our EPS estimate for this year of $9.90. With the price-to-earnings ratio below our long-term fair value estimate at 17, the rising P/E multiple could add 4.0% to annual returns over the next five years.

We also expect Genuine Parts to increase EPS by 6% per year going forward. Lastly, Genuine Parts is a dividend growth company, and has raised its dividend for 68 consecutive years. The stock recently yielded 2.9%. As a result, total returns could reach 12.9% per year over the next five years, making the stock a potential buy.

About the Author

Bob Ciura is currently senior vice president of Sure Dividend, and has been in that role since 2016. Previously, he was an independent equity analyst for a variety of investment services, including The Motley Fool and Seeking Alpha. Mr. Ciura has over five years of experience in financial modeling and equity valuation. He has a Bachelor's degree in finance from DePaul University, and an MBA from the University of Notre Dame.

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