1 Great Dividend You Can Buy Right Now

Dividend stocks are everywhere, but many just downright stink. In some cases, the business model is in serious jeopardy, or the dividend itself isn't sustainable. In others, the dividend is so low, it's not even worth the paper your dividend check is printed on. A solid dividend strikes the right balance of growth, value, and sustainability.

Today, and one day each week for the rest of the year, we're going to look at one dividend-paying company that you can put in your portfolio for the long term without too much concern. This isn't to say that these stocks don't share the same macro risks that other companies have, but they are a step above your common grade of dividend stock. Check out last week's selection.

This week, we're diving deep into the auto and industrial parts replacement market and taking a look at why Genuine Parts (NYSE: GPC  ) is a name you can trust.

Genuine Parts: more than meets the lug nut
The case often made for owning Genuine Parts, or for avoiding it, is actually one and the same. Newer cars produced today are expected to last longer without the need for parts replacement which, ultimately, is a negative for auto parts suppliers like Genuine Parts, AutoZone (NYSE: AZO  ) , and Advance Auto Parts (NYSE: AAP  ) . Conversely, the price of new cars is soaring relative to stagnant consumer wages. This is enticing enough to spur the sale of used and older vehicles which can often require considerably more maintenance, playing into the hands of all three of the above-named companies.

Genuine Parts is actually much more than just auto parts, as it supplies bearings, hydraulic and pneumatic components, and other parts to the industrial sector, as well as office supplies and electronic materials. As you might imagine, its office products segment has been under serious pressure as small business spending has stagnated and online competition has eaten into bricks-and-mortar sales. Similarly, Genuine Parts' electronics segment is prone to pricing pressures based on industrywide demand. Luckily, all four segments have been growing and have contributed to a 4% same-store-sales boost for Genuine Parts in its most recent quarter.

Even better, the new auto sales forecast from Edmunds.com could signal that a boost in replacement auto parts is coming. According to Edmunds, auto sales are expected to tally 15 million units in 2013, only a 4% rise from 2012 and the slowest growth since the recession. That's bad news for domestic auto giants General Motors and Ford who rely on consumers to pay a premium for newer and more reliable vehicles, but it's just the boost auto replacement part providers like Genuine Parts are looking for.

A battle royale
What this really comes down to is a comparison between Genuine Parts and its NAPA Auto Parts stores and its primary foes AutoZone and Advance Auto Parts.

AutoZone's first-quarter results in early December highlighted its 25th straight double-digit EPS increase, but were fueled, yet again, by heavy share repurchases and cost-cutting, and not much organic top-line growth. Same-store sales increased just 0.2% for AutoZone and it boasted a scary $3.7 billion in net debt. 

Advance Auto Parts, which had been entertaining the idea of putting itself up for sale, reported a third-quarter EPS decline of 14% as same-store sales dropped 1.8% in early November. Despite its feverish pace opening stores, Advance Auto's management team noted weaknesses in cold weather markets and a shortfall in connecting with its commercial customers.

Genuine Parts, however, has been clicking on all cylinders. As I noted previously, its same-store sales advanced 4% in its most recent quarter as a mixture of product and business segment diversity, overseas expansion, and cost-cutting combined to improve results from the bottom up. Cumulatively, Genuine Parts also has the least amount of net debt on its balance sheet among these three companies at $102 million.

A 56-point inspection
One of the greatest perks of maintaining close relationships with its commercial customers while also successfully transitioning overseas and keeping costs under control is that cash flow often remains consistent or heads higher. Since 2007, Genuine Parts has averaged $553 million in annual cash flow. Not surprisingly, its cash flow allows the company incredible flexibility relative to its peers in opening new stores, expanding into new product lines and... paying a really nice dividend!

If you look under the hood of Genuine Parts you'll discover a company that's raised its annual payout to shareholders a near-record 56 consecutive years! As you know from my frequent highlighting of dividend aristocrats, this is just a stone's throw from the current record-holder Diebold, which has increased its payout in 59 straight years. Have a look for yourself at this dividend's amazing growth:


Source: Nasdaq.com.

I've definitely featured more prolific dividend growth rates previously, but few offer the stability that Genuine Parts can offer investors. It's also worth noting how rapidly the payout has increased in the past two years, which leads me to believe that the company anticipates a sizable slowdown in new auto sales. Yet, even with a 10% payout hike last year, its payout ratio of 49% leaves plenty of room for future growth.

Foolish roundup
Without mincing words, Genuine Parts consistently drives over its competitors and is the safest bet in auto parts supply. AutoZone's debt is a concern, Advance Auto Parts' growth is too inconsistent, and don't even get me started on the laughing stock of the sector, Pep Boys. Genuine Parts' ancillary businesses and ever-expanding product line provide a degree of stability during tough economic times that its peers simply can't match. At just 15 times forward earnings and yielding 3%, this appears to be a smart income-producing play for at least the next decade.

Is the Ford rebound about to hit neutral?
Ford has been performing incredibly well as a company over the past few years -- it's making good vehicles, is consistently profitable, recently reinstated its dividend, and has done a remarkable job paying down its debt. But Ford's stock seems stuck in neutral. Does this create an incredible buying opportunity, or are there hidden risks with the stock that investors need to know about? To answer that, one of our top equity analysts has compiled a premium research report with in-depth analysis on whether Ford is a buy right now, and why. Simply click here to get instant access to this premium report.


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