Our analysis is based on comparing W.W. Grainger, Inc. with the following peers – Anixter International Inc., WESCO International, Inc., Fastenal Company, HD Supply Holdings, Inc., MSC Industrial Direct Co., Inc. Class A, Houston Wire & Cable Company, Snap-on Incorporated, Harsco Corporation, Watsco, Inc. Class B and Lawson Products, Inc. (AXE-US, WCC-US, FAST-US, HDS-US, MSM-US, HWCC-US, SNA-US, HSC-US, WSO.B-US and LAWS-US).
W.W. Grainger, Inc.’s dividend yield is 2.09 percent and its dividend payout is 42.99 percent. This compares to a peer median dividend yield of 1.91 percent and a payout level of 13.62 percent. This type of dividend performance might make it a good stock for dividend investors. However, the company’s average dividend quality score of 58 out of a possible score of 100, points to some weakness in the sustainability of its robust payout ratio, and makes its less attractive for dividend investors seeking current income.
Dividend Quality Overview
- Over the last twelve months (prior to September 30, 2016), GWW-US paid a high quality dividend, which represents a yield of 2.07% at the current price.
- Dividend quality trend has not been consistent over the last five years. Dividends were paid during each of these years — of these 4 were high quality and 1 was medium quality.
- The ending cash balance is less than the last full year dividend payment and cannot be relied on to cushion any significant reduction of cash flows in the future.
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Over the last twelve months (prior to September 30, 2016), GWW-US paid a high quality dividend.
The source of the company’s cash to support the dividend paid over the last twelve months is operating cash flow (coverage of 3.12x), investing cash flow (coverage of -1.04x), issuance cash flow (coverage of -1.02x) and twelve-month prior cash (coverage of 0.87x), for a total dividend coverage of 1.96x.
GWW-US‘s issuance cash flow includes outflows from net share buybacks (coverage of -2.69x). Thus, the total coverage including share buybacks is 4.66x, which reflects our assumption that the cash paid for share buybacks is discretionary and could instead be used to pay dividends.
These coverage ratio factors imply that the firm’s dividends are wholly paid from operating and investing cash flows net of any debt repayments, which suggests a high dividend quality.
|Dividend Yield (%)||1.38||1.57||1.45||1.67||2.44||2.09|
|Dividend Payout (%)||27.78||32.14||32.26||36.42||39.64||42.99|
A complete list of metrics and analysis is available on the company page.
W.W. Grainger, Inc. operates as a distributor of maintenance, repair and operating products. The company offers maintenance, repair and operating supplies and other related products and services through local branches, catalogs and the Internet. It offers a combination of product breadth, local availability, speed of delivery, detailed product information and competitively priced products and services. The products offered include material handling equipment, safety and security supplies, lighting and electrical products, power and hand tools, pumps and plumbing supplies, cleaning and maintenance supplies, forestry and agriculture equipment, building and home inspection supplies, vehicle and fleet components and many other items primarily focused on the facilities maintenance market. It also provides inventory management and energy efficiency solutions. The company was founded by William Wallace Grainger in 1927 and is headquartered in Lake Forest, IL.
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