The upcoming stock analysis is about a company, which is on its way to be a part of the dividend kings. It increased its dividend for 45 years and recently announced another increase of 24 cents per share. It is about the electronic wholesaler W.W. Grainger, which experienced quite a decline in the last couple of months.

Company Overview

W.W. Grainger (GWW) engages in the distribution of maintenance, repair, and operating supplies, as well as other related products and services for businesses and institutions primarily in the United States and Canada. It operates in the United States, Canada, Japan, Mexico, India, Puerto Rico, China, Colombia, Panama, and the Dominican Republic. The company was founded in 1927 and currently pays an annual dividend of 5.12 USD per share.

Valuation

Currently GWW is pricedat 179.32 USD per share.

If I take the weighted average of the 4 ratios according to the 5year average the price would be at 221.13 USD. That means the current price is 18.9% below its 5 year average. The 5 year high was at 270.15 USD, which was about 3.5 years ago, so currently the stock trades 33.6% below its 5-year high.

The fair market value ratio of the industrial distributor sector, according to morningstar is currently at 0.96. If I divide the current price by it I will get a price of 186.79 USD.

Earnings per share growth

In 2011 the EPS were at 9.07 USD and EPS in 2016 were at 9.87 USD. This makes it an average growth per year of 1.70%.This does not look so impressive but taking to account that from 2015 to 2016 was the only decline in EPS in the last 10 years the overall trend looks much better. In the last than 10 years GWW almost doubled their EPS from 4.94 USD in 2007 to 9.87 USD in 2017.

Dividend History and Future

GWW has an impressive dividend history with increasing the dividend for 45 years in a row. In the last 5 years, the average growth per year is 13.90% based on a dividend of 2.52 USD in 2011 and a current full year one of 4.83 USD.Even though the dividend is already on a very high level the pay out ratio is still on a reasonable level