These Stocks Are No Dividend Lemons

Investing In Automotive Dealership Dividend Stocks

A while back I wrote an article titled, “Drive Your Way Towards Dividends,” where I discussed how the average age of automobiles on the American road stands at 11.4 years. Driving our cars longer than ever before, I highlighted many of the dividend stock beneficiaries of this trend. Names such as Genuine Parts Company (GPC)Advance Auto Parts Inc. (AAP) along with Pep Boys – Manny, Moe & Jack (PBY) and O’Reilly Automotive Inc. (ORLY) benefited the most. Of course, car parts companies are just part of this automotive equation. As the effects of the great recession took hold upon the American consumer other segments of the car trade also stood to benefit, namely the auto dealership industry. As credit and cash strapped consumers increasingly looked for automotive bargains used car sales jumped 4.4% from 2011 to 2012 causing a boon for the auto dealerships as margins on sales of used cars are much higher than sales of new cars. In fact, Warren Buffett, capitalizing on this trend, just announced earlier this year that Berkshire Hathaway is buying Van Tuyl Group, the fifth-largest car dealership company in the U.S. If that’s not an endorsement of the sector then I don’t know what is. With that being said, let us examine some of the dividend paying auto dealership stocks that might add a little diversity to your dividend portfolio.

Penske Automotive Group, Inc. (PAG), is a name that is very familiar to most people in the U.S. Operating as an automotive retailer, PAG sells new and used motor vehicles of approximately 35 brands in the U.S. and United Kingdom. Currently yielding 1.80% with a moderately low payout ratio of 25.7% based on an EPS of 3.16, PAG also has a very impressive ten year annualized dividend growth rate of 28.63%. With a current PE of 15.6 and a forward PE of 13.2, PAG is priced well below its peers and the S&P and has plenty of room to continue to grow its dividend.

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Disclosure: Long None. 

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