Dividend Aristocrats In Focus: Real Elements Firm

Up to date on April thirtieth, 2024 by Bob Ciura

The Dividend Aristocrats are among the many highest-quality dividend development shares an investor should buy. The Dividend Aristocrats have elevated their dividends for 25+ consecutive years.

Turning into a Dividend Aristocrat is not any small feat. Past sure market capitalization and buying and selling quantity necessities, Dividend Aristocrats should have raised their dividends annually for at the very least 25 years, and be included within the S&P 500 Index.

This presents a excessive hurdle that comparatively few corporations can clear. For instance, there are at present 68 Dividend Aristocrats out of the five hundred corporations that comprise the S&P 500 Index.

We created a whole checklist of all 68 Dividend Aristocrats, together with essential monetary metrics like dividend yields and price-to-earnings ratios. You may obtain an Excel spreadsheet of all 68 Dividend Aristocrats by clicking the hyperlink under:

Disclaimer: Positive Dividend will not be affiliated with S&P International in any method. S&P International owns and maintains The Dividend Aristocrats Index. The data on this article and downloadable spreadsheet is predicated on Positive Dividend’s personal assessment, abstract, and evaluation of the S&P 500 Dividend Aristocrats ETF (NOBL) and different sources, and is supposed to assist particular person traders higher perceive this ETF and the index upon which it’s based mostly. Not one of the data on this article or spreadsheet is official information from S&P International. Seek the advice of S&P International for official data.

A good smaller group of shares have raised their dividends for 50+ years in a row. These are generally known as the Dividend Kings.

Real Elements (GPC) has elevated its dividend for 68 consecutive years, giving it one of many longest dividend development streaks out there. You may see all 54 Dividend Kings right here.

There may be nothing overly thrilling about Real Elements’ enterprise mannequin, however its regular annual dividend will increase show {that a} “boring” enterprise may be simply what revenue traders want for long-term dividend development.

Enterprise Overview

Real Elements traces its roots again to 1928 when Carlyle Fraser bought Motor Elements Depot for $40,000. He renamed it, Real Elements Firm. The unique Real Elements retailer had annual gross sales of simply $75,000 and solely 6 staff.

it has grown right into a sprawling conglomerate that sells automotive and industrial elements, electrical supplies, and basic enterprise merchandise. Its international span reaches all through North America, Australia, New Zealand, and Europe and is comprised of greater than 3,000 places.

Supply: Investor Presentation 

The commercial elements group sells industrial alternative elements to MRO (upkeep, restore, and operations) and OEM (authentic gear producer) prospects. Prospects are derived from a variety of segments, together with meals and beverage, metals and mining, oil and fuel, and well being care.

Real Elements posted fourth quarter and full-year earnings on February fifteenth, 2024, and outcomes have been blended. Adjusted earnings-per-share got here to $2.26, which was six cents forward of estimates.

Income was up very barely year-over-year to $5.6 billion, which missed estimates by $60 million. Gross sales have been pushed by a 2% profit from acquisitions, a 0.3% favorable affect of international change translation, and a -1.2% affect from comparable gross sales.

The corporate guided for $9.79 to $9.90 per share in adjusted earnings, and we’ve set our preliminary estimate on the low finish at $9.80. Real Elements expects to see 3% to five% gross sales development, consistent with analyst estimates.

Progress Prospects

Real Elements ought to profit from structural tendencies, because the atmosphere for auto alternative elements is very constructive. Customers are holding onto their vehicles longer and are more and more making minor repairs to maintain vehicles on the street for longer, reasonably than shopping for new vehicles.

As common prices of car restore enhance because the automobile ages, this straight advantages Real Elements.

In line with Real Elements, automobiles aged six years or older now symbolize over ~70% of vehicles on the street. This bodes very effectively for Real Elements.

As well as, the marketplace for automotive aftermarket services is critical. Real Elements has a large portion of the $200 billion (and rising) automotive aftermarket enterprise.

Supply: Investor Presentation

A technique the corporate has captured market share on this house has traditionally been acquisitions. It has made a number of acquisitions over the course of its historical past.

For instance, Real Elements acquired Alliance Automotive Group for $2 billion. Alliance is a European distributor of car elements, instruments, and workshop gear. Extra not too long ago, Real Elements accomplished its $1.3 billion all-cash buy of Kaman Distribution Group, which is a number one energy transmission, automation, and fluid energy firm, in 2022.

Lastly, earnings development will likely be aided by expense reductions. The corporate famous it’s present process a company restructuring to decrease headcount and enhance effectivity. With these modifications ought to come higher working margins over time.

GPC expects to see prices within the vary of $100 million to $200 million as a result of restructuring. Nevertheless, that ought to supply $40 million in financial savings in 2024, in addition to $45 million to $90 million on an annualized foundation thereafter.

We count on 6% annual EPS development over the following 5 years for Real Elements.

Aggressive Benefits & Recession Efficiency

The most important problem dealing with the retail trade proper now, is the specter of e-commerce competitors. However automotive elements retailers corresponding to NAPA aren’t uncovered to this threat.

Automotive repairs are sometimes advanced, difficult duties. NAPA is a number one model, thanks partly to its status for high quality merchandise and repair. It’s invaluable for purchasers to have the ability to ask inquiries to certified employees, which provides Real Elements a aggressive benefit.

Real Elements has a management place throughout its companies. All 4 of its working segments symbolize the #1 or #2 model in its respective class. This results in a robust model, and regular demand from prospects.

Real Elements’ earnings-per-share throughout the Nice Recession are under:

2007 earnings-per-share of $2.98
2008 earnings-per-share of $2.92 (2.0% decline)
2009 earnings-per-share of $2.50 (14% decline)
2010 earnings-per-share of $3.00 (20% enhance)

Earnings-per-share declined considerably in 2009, which ought to come as no shock. Customers are inclined to tighten their belts when the financial system enters a downturn.

That stated, Real Elements remained extremely worthwhile all through the recession, and returned to development in 2010 and past. The corporate remained extremely worthwhile in 2020, regardless of the financial harm attributable to the coronavirus pandemic.

There’ll all the time be a sure stage of demand for automotive elements, which provides Real Elements’ earnings a excessive flooring.

Valuation & Anticipated Returns

Based mostly on the newest closing worth of ~$157 and anticipated 2024 earnings-per-share of $9.80, Real Elements has a price-to-earnings ratio of 16.0. Our truthful worth estimate for Real Elements is a price-to-earnings ratio of 17.

Consequently, Real Elements is barely undervalued these days. A number of growth might enhance annual returns by 1.2% per yr over the following 5 years.

Real Elements’ future earnings development and dividends will add to future returns. We count on Real Elements to develop its earnings-per-share by 6% yearly over the following 5 years.

The inventory additionally has a 2.5% present dividend yield. Real Elements has a extremely sustainable dividend. The corporate has paid a dividend yearly because it went public in 1948.

Including all of it up, Real Elements’ complete annual returns might include the next:

6% earnings development
2.5% dividend yield
1.2% valuation a number of growth

In complete, Real Elements is predicted to generate complete annual returns of 9.7% over the following 5 years. This can be a robust price of return which makes the inventory a purchase.

Ultimate Ideas

Real Elements doesn’t get a lot protection within the monetary media. It’s removed from the high-flying tech startups that sometimes obtain extra consideration. Nevertheless, Real Elements is a really interesting inventory for traders in search of steady profitability and dependable dividend development.

The corporate has a protracted runway of development forward, attributable to favorable trade dynamics. It ought to proceed to lift its dividend annually, because it has for the previous 68 years.

Given its historical past of dividend development, Real Elements is appropriate for traders wanting revenue, in addition to regular dividend will increase annually. With a virtually 10% anticipated price of return, GPC inventory is a purchase.

In case you are fascinated with discovering extra high-quality dividend development shares appropriate for long-term funding, the next Positive Dividend databases will likely be helpful:

The foremost home inventory market indices are one other stable useful resource for locating funding concepts. Positive Dividend compiles the next inventory market databases and updates them month-to-month: