Lanny’s Recent Stock Purchase – W.W. Grainger, Inc. (GWW)

Closing out the April month on a high note!  I have deployed more capital into a dividend aristocrat, as the stock price was falling down, a dividend increase was coming up and the timing was too tempting for me to sit on the sidelines.  This marks the 5th individual stock purchase this year and the second in April alone.  Feels great being in the driver’s seat, in my own lane on the highway to financial freedom!  Come check out the purchase of W. W. Grainger, Inc. (GWW)!

W W Grainger, Inc. (GWW) Stock Purchase

From Google Finance, “W.W. Grainger, Inc. (Grainger) is a distributor of maintenance, repair and operating (MRO) supplies and other related products and services. The Company offers its products and services to businesses and institutions in the United States and Canada, with presence also in Europe, Asia and Latin America. The Company operates through two segments, which include the United States and Canada. The Company’s business support functions provide coordination and guidance in the areas of accounting and finance, business development, communications and investor relations, compensation and benefits, information systems, health and safety, global supply chain functions, human resources, risk management, internal audit, legal, real estate, security, tax and treasury. The Company’s other businesses also include Zoro Tools, Inc. (Zoro), the single channel online business in the United States, MonotaRO Co. (MonotaRO) in Japan, and operations in Europe, Asia and Latin America.”

See below for the metrics and reasons for purchase!

1.) Dividend Yield: At the time of purchase, their dividend was $1.22 per quarter or $4.88 per year at a price point of $193.78, this was a yield of 2.52%, greater than the industry average and S&P 500.  Further, as this was a very well-timed purchase, they increased their dividend the next day by 5%.  The total dividend is now $5.12 per year or 2.64% yield!  Loving this all the way.

2.) Dividend Growth: Can we talk aristocrat status?  Can we, though, truthfully?  Yes, this company has increased dividends for over 45+ years!  Right up there with JNJ & PG, two foundation dividend stocks for your portfolio.  The three year average, though, is getting tighter at 6% and the 5 year average growth rate is at 10%, not bad.

3.) Price to Earnings Ratio: With analysts expecting $11.60 in earnings per share this year, this computed to a P/E ratio of 16.71.  This isn’t too bad and is in line with what is included in our Dividend Diplomat Stock Screener!  To perform this math – take the share price dividend by the earnings per share of $11.60.  Further, the P/E ratio is less than the overall market, which is currently very hard to find.

4.) Payout Ratio: Additionally, their payout ratio, based on a $5.12 dividend, as we will use the latest dividend we have knowledge of – is right around 44%, right smack in that sweet spot of 40-60%.  I like this sweet spot as it shows they want to reinvest earnings in the company and deliver other earnings directly to shareholders.  It’s a similar “I may be seasoned, but I still like to party” type of deal.  Excited about these results here.

5.) Performance & 5-year Yield Average: I would also like to point out Grainger’s yield of 2.64% is greater than their 5 year yield average by approximately 80+ basis points, showing further signs of undervaluation!  Their 5 year yield average per dividendinvestor.com showed 1.80%.

See my trade screen shot below: 

I purchased $1,350 worth at $193.78 per share for a total of 6.9463 shares, with a $3.95 trading fee.  This added $35.57 to my forward dividend income and may not be the last time I pick up this type of entity!  In fact, I will, within the next two Tuesdays, purchase more shares if they stay at or below this share price.  Reason being – their ex-dividend date is the 19th of April and I am trying to make better use of my idle cash by potentially paying more down on my vehicle loan.

GWW Stock purchase summary & Conclusion

This is a new position in my portfolio within the industrial supply industry and will be producing a forward income of $8.89 per quarter, with another dividend aristocrat under the belt.  This was a well-timed trigger, as I purchased the company on Tuesday and Wednesday, the 26th, they increased their dividend 5%.  Another $1,350 deployed, dividend income added, an aristocrat feather has been placed in the cap… all leading to another step toward my goals set for 2017.

What do you guys think?  Are you concerned Grainger (GWW) has competition from Amazon (AMZN)?  Do you think there could have better uses from my idle cash?  Better uses, such as – paying down my mortgage, walloping more towards my auto loan that I’m already paying down in a haste or something else?  Would love to hear the feedback!  Hope you enjoyed learning about a new aristocrat and talk soon.  Happy investing everyone!

-Lanny

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34 thoughts on “Lanny’s Recent Stock Purchase – W.W. Grainger, Inc. (GWW)

    • BHL –

      I do hope so and believe they are becoming more competitive on pricing to compete with AMZN, with the added industry expertise to boot. Looking forward to their business in the forthcoming years!

      -Lanny

  1. Picked up 5 shares myself last week. Their dividend metrics, price drop and aristocrat status made it a compelling buy for me.

    I do think Amazon is a threat, but they also cater to a different audience. Amazon provides speed, ease and low price while professionals using Grainger products also care about advise, service and testing out. Or at least, that’s my 2 cents 🙂

    Cheers,
    Tall Investing

    • Tall –

      Exactly, love that you also have pointed out how Grainger differentiates themselves. Cheap, quick and automatic are AMZN’s products/services; however, Grainger has the industry knowledge, expertise and LARGE customers, as well, not your one-time customers, typically. We shall see what happens to this landscape, but Amazon does not have people-skills, where as Grainger… does.

      -Lanny

  2. Sounds like Grainger is in your sweet spot.

    I like Abercrombie (ANF) with a juicy 7% dividend. As they move to online retailing their stock should bounce back.

    Also like GE.

    • Mike –

      Thanks for sharing your comment. Any reason why you like ANF? Think that their products are still widely used? Are they still popular among the 12-20 year old crowd? Would love to hear your perspective on this one!

      -Lanny

      • I can’t speak to their popularity in the current day. They’ve taken huge hits. However, their brand Hollister is growing like crazy and extremely popular. Abercrombie proper signed a deal with an Asian e-retailer recently so that should boost ANF substantially. Also, fashion is cyclical. I think they’ll make a big comeback. I myself, a 30 year old, bought a lot of Abercombie clothing this past year and I never even used to wear it. The fact that they converted me to a customer makes me think more are following suit. They have well-made, durable clothing. I purchase the stuff they have that has minimal to no logo.

    • Meter –

      Yessir! I wouldn’t be surprised if we see more purchases of them between last week, this week and the upcoming short-time period due to their decline in share price. An aristocrat that’s never really been at these levels before. Interesting, very interesting.

      -Lanny

  3. Excellent purchase in my view. There was a big drop in share price, great timing! The company was totally out of my radar, but it’s better to keep an eye on it. Wish I had some idle cash now for stock purchase…

    • Roadrunner –

      Thank you for the comment, love that they are an aristocrat and any time you are able to grab discounted shares is always a plus! They’ve never really been in this range, which is exciting. Lucky I was able to grab up some shares!

      -Lanny

    • Gremlin –

      That it did! Appreciate the comment and could have grabbed more today, but didn’t have order in time. All is okay : ) Blood bath in the market on other aristocrats today (ADM & EMR), keep an eye out!

      -Lanny

    • Voyage –

      Thank you! I think it’s fun when you can grab it just before the ex-date, of course – ensuring that it’s a right value. Still can grab shares by end of day tomorrow for the first dividend!

      -Lanny

  4. I like the buy. I picked some up last week and still looking at GWW in May as it continues to look weak. It’s been in my portfolio for about a decade and it probably the closest company to a ‘retail’ stock that I’d hold in my account. Of course, with anything remotely retail there’s the AMZN “threat.” Just something to think about.

    • DivHut –

      Yep, AMZN is always on the mind here. Grainger at least differentiates themselves to having a consultative piece to their relationships with customers, as it relates to warehousing and inventory space. Love the latest increase, though!

      -Lanny

  5. Came across your blog, great content and information. I myself have a dividend blog that I have found super helpful in tracking my progress and income goals.

    GWW is a company I have been watching, but I just haven’t pulled the trigger on. Good analysis and overview.

    I believe the threat of Amazon wont hurt GWW, personal I believe the Amazon killing retail story to be WAY overblown and thus presenting great opportunities in the retail sector, i.e. Target, Dollar General and others.

    • Digest –

      Welcome! And yes – I believe Grainger has technical expertise in the industry/warehouse space, as well as has a piece of a relationship-feeling to their customers. I don’t believe Amazon should shake things up too, too much. Thanks for checking out the article and appreciate the comment.

      -Lanny

  6. Awesome buy!
    GWW is definitely on my list. Online ordering is a concern, but there is probably a need for brick and mortar. As manufacturer like John Deer is required an unlock code to do basic maintenance on their machinery. Unless, the court ban them from doing that. For that, there is still a need for brick and mortar where they can streamline their tech out. There is always a need for a “personal” support. Which small town and farming community are used to.

    Amazon is remain strong as they have contractors to come out also… But I’m not sure if this would beat the “face-to-face” customer service.
    In the end, it’s all about pricing. If GWW have the cash to keep lowering their price, to compete with Amazon cheap Chinese products. But 10-20 years, GWW will not go anywhere, they’d still adapt to the IT world, including online shop.

    • Vivianne –

      Thank you for the detailed post, tremendously appreciated. They haven’t been in busy this long if they couldn’t adapt! Looking forward to them taking on the challenge, actually, and wouldn’t mind for similar dividend growth and more investing in their online platform to have a solid footing there.

      -Lanny

  7. GWW seems like a hot stock, concerning the comments around here. Can’t blame you for buying either 😉
    There dividend growth might be slowing, the rest of the metrics sure look very nice (and their payout ratio leaves room for many more to follow!)

    • Divnomics –

      Yep! That’s more than likely reasons for the lower growth – keeping an eye on the payout, given the competition and potential future pressure on earnings if competition increases, which – it should/will. They still have a plethora of room to grow the dividend and earnings this quarter were welcomed with open arms : )

      -Lanny

    • PCI –

      Nice nice, and of course – anytime an aristocrat gets to these levels – have to consider purchasing; doesn’t happen too often! Looking forward to see them adjust to the changes in the competitive marketplace.

      -Lanny

  8. Love your blog, I just went and bought $2,000 worth of the GWW. I never even knew about them it’s all only thanks to your post

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