Genuine Parts and W.W. Grainger: 2 Companies That Can Boost Your Personal Cash Flow

Genuine Parts and W.W. Grainger give you raises every year.

Jun 15, 2014 at 8:00AM

Successful investing over the long term stems from looking for companies that increase revenue and free cash flow over the long term. The companies should also retain a sufficient amount of cash for reinvestment back into the business.

However, you may ask, what about increasing my personal cash flow? The answer lies in an S&P 500 list of Dividend Aristocrats -- companies that have boosted dividends for at least the last 25 consecutive years. With these companies, investors enjoy a steady stream of dividend raises over the years. Moreover, companies that boost dividends regularly increase your chances for superior total stock market returns over the long term.

Let's take a look at two Dividend Aristocrats -- parts, office, and electronics products seller Genuine Parts (NYSE:GPC) and direct seller of tools and parts W.W. Grainger (NYSE:GWW).

Genuine Parts
Genuine Parts sells automotive and industrial parts under names such as the National Automotive Parts Association, or NAPA, and Motion Industries. The company also sells office products under S.P. Richards Company and electronics under its EIS subsidiary. Fundamentally Genuine Parts performed OK over the past 10 years growing revenue, net income, and free cash flow 55%, 73%, and 93%, respectively. 

Looking at Genuine Parts' balance sheet in the most recent quarter, cash and long-term debt-to-equity clocked in at 3% and 15%, respectively. The low amount of long-term debt is a good thing. Interest on debt can choke out profitability and cash flow over the long term. Investors should look for companies with a long-term debt-to-equity ratio of 50% or less.

Over the past 10 years, Genuine Parts' dividends have made a huge difference in its total return. The company clocked in capital gains of 118% during that time. Reinvesting dividends increased the total return a whopping 87%, bringing the total to 205% during that time and beating the S&P 500 total return of 111%. 

Investors should judge dividend sustainability based on the percentage of free cash flow paid out in a full year. With that said, investors should look for dividend-to-free cash flow ratios of 50% or less. Last year, Genuine Parts paid out 35% of its free cash flow in dividends. Currently, the company pays its shareholders $2.30 per share per year, translating into an annual yield of 2.7%.

W.W. Grainger
Grainger describes itself as a "broad-line distributor of maintenance, repair, and operating supplies." You can go to this company to find batteries, tools, paint, etc.  The company sells its products via salesmen, brochures, catalogs, and websites. Over the past 10 years, Grainger has expanded its revenue, net income, and free cash flow 87%, 178%, and 157%, respectively. 

Grainger's cash and long-term debt-to-equity clocked in at 11% and 13%, respectively, in the most recent quarter. Over the past 10 years, Grainger has registered capital gains of 380%. Reinvesting dividends added 87%, bringing the total return to 467% and beating the S&P 500 total of 111%. 

Last year Grainger paid out 34% of its free cash flow in dividends. Currently, the company pays its shareholders $4.32 per share per year and yields 1.6% in dividends.

Looking ahead
Genuine Parts will most likely be around for a while. Consumers will always need car parts and industries will need parts for their machines. Last year, Genuine Parts acquired the remaining 70% of Exego Group, which was renamed GPC Asia Pacific, an acquisition that subsequently increased its influence in the Asia-Pacific market. Global expansion will be key to this company's future potential.

E-commerce, expanding market share gains with larger customers, and expansion overseas will also drive growth for W.W. Grainger. Both of these companies deserve a long-term spot in your portfolio. 

More stocks that deserve a long-term spot in your portfolio
The smartest investors know that dividend stocks like Genuine Parts and W.W. Grainger simply crush their non-dividend-paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

William Bias has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers