A Comprehensive Review of Advance Auto Parts Inc's Dividend Performance and Sustainability
Advance Auto Parts Inc (AAP, Financial) recently announced a dividend of $0.25 per share, payable on 2023-10-27, with the ex-dividend date set for 2023-10-12. As investors anticipate this upcoming payment, the focus also shifts to the company's dividend history, yield, and growth rates. Using data from GuruFocus, let's delve into Advance Auto Parts Inc's dividend performance and evaluate its sustainability.
What Does Advance Auto Parts Inc Do?
Advance Auto Parts is a leading retailer of aftermarket automotive parts, tools, and accessories catering to do-it-yourself customers and third-party vehicle repair facilities in North America. As of the end of 2022, Advance operated 5,086 stores and serviced 1,311 independently owned Carquest stores. The company's Worldpac chain is a top distributor of imported original-equipment parts. In 2022, Advance derived 59% of its sales from commercial clients, with the remainder from DIY shoppers.
A Glimpse at Advance Auto Parts Inc's Dividend History
Advance Auto Parts Inc has maintained a consistent dividend payment record since 2006, distributing dividends on a quarterly basis. The company has increased its dividend each year since 2006, earning it the title of a dividend achiever. This accolade is awarded to companies that have consistently increased their dividend each year for at least the past 17 years.
Breaking Down Advance Auto Parts Inc's Dividend Yield and Growth
As of today, Advance Auto Parts Inc has a 12-month trailing dividend yield of 9.15% and a 12-month forward dividend yield of 1.91%. This indicates an expected decrease in dividend payments over the next 12 months. However, the company's current dividend yield of 9.15%, near a 10-year high, outperforms 93.31% of global competitors in the Retail - Cyclical industry, making it an attractive proposition for income investors.
Over the past three years, Advance Auto Parts Inc's annual dividend growth rate was 192.40%. Extended to a five-year horizon, this rate decreased to 106.30% per year. Over the past decade, Advance Auto Parts Inc's annual dividends per share growth rate stands at an impressive 32.30%. Based on the company's dividend yield and five-year growth rate, the 5-year yield on cost of Advance Auto Parts Inc stock as of today is approximately 341.91%.
The Sustainability Question: Payout Ratio and Profitability
The sustainability of a company's dividend can be evaluated by examining its payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, ensuring funds for future growth and unexpected downturns. As of 2023-06-30, Advance Auto Parts Inc's dividend payout ratio is 0.78, raising concerns about the sustainability of the company's dividend.
Advance Auto Parts Inc's profitability rank of 8 out of 10 as of 2023-06-30 suggests good profitability prospects. The company has reported positive net income for each year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
For dividends to be sustainable, a company must exhibit robust growth metrics. Advance Auto Parts Inc's growth rank of 8 out of 10 suggests a positive growth trajectory relative to its competitors. The company's revenue per share and 3-year revenue growth rate indicate a strong revenue model, with revenue increasing by approximately 10.40% per year on average, outperforming approximately 69.34% of global competitors.
The company's 3-year EPS growth rate showcases its ability to grow its earnings, a critical component for sustaining dividends in the long run. Over the past three years, Advance Auto Parts Inc's earnings increased by approximately 6.50% per year on average, outperforming approximately 44.12% of global competitors. Additionally, the company's 5-year EBITDA growth rate of 8.50% outperforms approximately 51.36% of global competitors.
Concluding Remarks
In conclusion, while Advance Auto Parts Inc has a commendable dividend history and yield, the sustainability of its dividends is questionable given its current payout ratio. However, the company's profitability and growth metrics present a positive outlook. Thus, investors should weigh these factors carefully when considering Advance Auto Parts Inc for their portfolios. GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
