Genuine Parts Company is an American business that distributes automotive and industrial replacement parts, electrical materials, and machinery and equipment. While many other companies have tried to compete with Genuine Parts on price, they have quickly found that it is difficult to match the company’s commitment to quality. This has resulted in a loyal customer base that keeps returning for Genuine Parts’ products and services. In an increasingly competitive marketplace, this customer loyalty is a key asset that allows Genuine Parts to maintain its position as a leader in the industry. Founded in 1925, The company has been in business for over 97 years and has a long history of providing quality products and excellent service. Today Genuine Parts operates in more than 15 countries, and they are a leading distributor of automotive and industrial replacement parts in North America, Australia, New Zealand, and Europe. In 2021, Genuine Parts had a revenue of $18.9 billion and a net income of $899 million. The company employs more than 52,000 people worldwide. Genuine Parts is publicly traded on the New York Stock Exchange (NYSE: GPC).
Business Model
Genuine Parts Company operates in two main segments: Automotive Parts, Industrial Parts.
The Automotive parts the company’s most important segment, accounting for roughly 66% of total sales. Their automotive part segment is widely regarded as the world’s largest service and distribution network for automotive parts and accessories. The Automotive Parts segment offers a complete inventory, cataloguing, marketing, training, and other programmes to its customers in the automotive aftermarket industry. Genuine parts global automotive network products are available to customers in both the commercial do-it-for-me (DIFM) and retail do-it-yourself (DIY) markets and cover the vast majority of global motor vehicle models. Their DIFM customers include local, regional, and national repair shops, auto dealers, and service stations. DIY customers are primarily served by Genuine parts stores or online. DIFM customers account for approximately 80% of total Automotive Parts segment sales.
Genuine Parts’ Industrial Parts segment is the second-largest, accounting for approximately 34% of total sales. The Industrial Parts Group primarily operates in North America and Australasia as Motion Industries, Inc., the Company’s wholly-owned subsidiary. Motion distributes industrial replacement parts and related supplies such as hoses, belts, bearings, pulleys, pumps, valves, chains, gears, sprockets, speed reducers, electric motors, industrial supplies, assembly tools, test equipment, adhesives, and chemicals to maintenance, repair and operation (MRO) and original equipment manufacturer (OEM) customers. In 2021, Motion had access to a database of over 12 million parts. It served over 170,000 OEM and (MRO) customers across North America and Australasia, including equipment and machinery, food and beverage, forest products, primary metals, and strategically targeted specialty industries such as power generation, government, transportation, and ports. Because of the nature of Motion’s business demands, Motion must meet critical delivery deadlines. As a result, most motion orders must be filled immediately from existing stock or delivered within 24 hours of order receipt. Motion maintains an ongoing purchase agreement with many national account customers, who collectively account for approximately 45% of total sales in the industrial parts segment.
Dividend Profile
Looking ahead, Genuine Parts is likely to grow at a healthy pace as it benefits from the increasing demand for maintenance parts. The company is well-positioned to capitalize on this trend with its strong brand, large global footprint, and extensive product offerings. The company’s stock has a current dividend yield of 2.28% and a payout ratio of 40.9%. Since 2011 Genuine Part’s dividend per share has been increasing at a CAGR of 9.28%. Genuine Part has increased its dividend for 66 consecutive years, making it one of the few Dividend King companies that have increased its dividend for at least 50 consecutive years.
Business Risk
As a company that manufactures and sells replacement parts and accessories, Genuine Part’s business largely depends on the economy’s health. When economic conditions are strong, customers are more likely to have the disposable income needed to maintain their vehicles and machinery. This, in turn, drives demand for Genuine Parts’ products. However, when the economy weakens, customers may put off buying new parts or may choose cheaper alternatives. This can lead to lower sales and profitability for Genuine Parts. The company must carefully monitor economic trends to adjust its business strategies accordingly.
Challenges
the automotive and industrial parts market is becoming increasingly competitive. In recent years, traditional retailers have stepped up their game, offering more competitive pricing and product selection. Additionally, online retailers such as Amazon have been making inroads into the automotive and industrial parts markets, posing a significant threat to Genuine Parts. Genuine Parts must continue providing better value-added services such as same-day shipping and expert customer support to stay ahead of the competition.
Final Thoughts
Investors seeking a reliable dividend stock can consider Genuine Parts. Genuine Parts is one of the few companies likely to benefit from the increasing demand for maintenance products. Genuine Parts is also a well-run business with a history of delivering shareholder value with a proven track record of paying and increasing dividends for 66 consecutive years, making it a great dividend stock for investors looking for income.