Thursday, February 24, 2011

Genuine Parts symbol, GPC. Be careful what you read.

Genuine Parts is one the dividend machines I profiled for income investors to include in the income producing part of their portfolios back in November, 2010. I was very disappointed today when I read in the Wall Street Journal that the dividend had been reduced; when in fact GPC increased our income from $.41 per share to $.45 per share this quarter. The Wall Street Journal accurately reported the change from $.41 to $.45 but placed the notice in the "reduced payout" list.

One of my rules regarding dividend machines is; if a dividend machine cuts or reduces the dividend, I have to sell it. Thankfully, I researched GPC's dividend income before I sold. Instead of selling, I added to my position.

GPC is indeed an income machine for income investors who have a solid cash flow strategy. The dividend increase came as a result of earnings that were up 20 percent. One of the reasons I like dividend machines is that any company that continuously increases the dividend tends to also continuously produce better earnings. We income investors buy earnings. Eventually, the price of the underlying stock will reflect increased earnings. Today GPC closed at $51.67 per share. When I profiled GPC as number three of my fifty two dividend machines the stock price was $48.53.

GPC reported that revenue was up 11 percent. The dividend increase is the 55th straight annual increase from a company that has paid uninterrupted dividends since 1948. GPC's dividend new yield is 3.5%.

In deed, be careful what you read. Check and recheck your sources before you make your investment decisions.

Very Truly Yours,