Dividend-paying companies can provide shareholders with streams of passive income. These sources of income can then be used in whatever way an investor would like, whether it's for paying bills, dividend reinvestment, or charitable contributions.

Having raised their dividends for at least 50 consecutive years, Dividend Kings are the most established dividend payers. Last month, Genuine Parts Company (GPC 0.01%) announced a 6.1% boost in its quarterly dividend per share to $0.95. For context, this was the 67th straight year that the company lifted its payout. 

This raises the following question for dividend growth investors: Is the stock a buy at the current share price? Let's examine Genuine Parts' fundamentals and valuation to find out.

A thriving company

Genuine Parts Company is known for its automotive replacement parts brand in North America and Australasia named NAPA, as well as numerous other brands in Europe like Alliance Auto Group.

With more than 725,000 parts sold under the NAPA brand name, Genuine Parts' automotive parts segment is one of the most dominant in the world. The segment made up 62% of the company's net sales in 2022, with the remaining 38% coming from the industrial parts segment headed by the industrial replacement parts company Motion Industries. 

Genuine Parts' net sales surged 15% higher year over year to $5.5 billion during the fourth quarter ended Dec. 31, 2022. What elements contributed to the large-cap company's sizzling top-line growth rate for the quarter?

Genuine Parts' comparable sales grew at an 11.1% clip in the fourth quarter. Consumer demand for automotive replacement parts remained healthy during the quarter, which was from the ongoing semiconductor chip shortage that resulted in an 8% drop in new vehicle sales in 2022. This is what helped Genuine Parts' automotive parts segment record 8.2% comparable sales growth for the quarter. Industrial parts segment comparable sales growth was even stronger at 16.7%, which was the seventh straight quarter of double-digit comp sales growth for the industrial group. 

Genuine Parts' acquisitions of industrial parts distributor Kaman Distribution Group in January 2022 and the Spain-based automotive distribution company Lausan Group last April helped to drive net sales higher by 8%. The company's international presence amid an environment in which the U.S. dollar remained robust weighed on net sales by 4.2% in the quarter.

Genuine Parts' non-GAAP (adjusted) diluted earnings per share (EPS) rose 14.5% over the year-ago period to $2.05 during the fourth quarter. Faster growth in selling, administrative and other expenses (19.7%) than net sales led to a 6 basis point decline in the company's non-GAAP net margin to 5.3%. This wasn't fully offset by a 0.8% reduction in Genuine Parts' diluted share count, which explains how adjusted diluted EPS grew at a slower rate than net sales. 

A customer shops for car tires.

Image source: Getty Images.

The market-beating dividend can keep growing

Genuine Parts' 2.2% dividend yield is significantly better than the S&P 500 index's 1.7% yield, and the modest dividend obligation adds even more appeal to the payout. 

This is because it is projected that Genuine Parts' dividend payout ratio will clock in below 43% in 2023. That leaves the company with the funds needed to keep executing acquisitions and repaying debt. Along with the 4.6% annual adjusted diluted EPS growth that analysts are expecting over the next five years, Genuine Parts should have plenty of 6% payout hikes in its future. 

A wonderful business at a sensible valuation

Up 39% in the last year, Genuine Parts has obliterated the broader market. Yet, the valuation still appears to be rational.

Genuine Parts' forward price-to-earnings (P/E) ratio of 17.9 is barely more than the specialty retail industry average forward P/E ratio of 16.7. Given the company's remarkable track record, this premium valuation is justifiable, in my opinion. That's why the stock looks like a buy for dividend growth investors