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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

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