Dividend Aristocrats Part 21 Of 52: W.W. Grainger

The last time I analyzed W.W. Grainger, I was impressed by the company’s clear growth plan and strong expected total returns.

The company’s growth plan – which is discussed in detail in this article – along with its reasonable valuation and 43 years of consecutive dividend increases make the company a favorite of The 8 Rules of Dividend Investing.

W.W. Grainger stacks up favorably to most other dividend growth investments at this time both qualitatively and quantitatively.  I am long W.W. Grainger and plan to hold the company’s stock indefinitely.I suggest other dividend growth investors consider W.W. Grainger as well.

W.W Grainger (GWW) is the leader in the United States maintenance, repair, and operations (abbreviated MRO) supply industry

The company has a network of 713 branches and 34 distribution centers.The bulk of the company’s supply chain is based in the United States and Canada.

W.W. Grainger also runs the following MRO e-commerce sites:

W.W. Grainger’s Growth Story

Before examining W.W. Grainger’s future growth potential, it is important to understand how quickly the company has grown historically: W.W Grainger has grown its earnings-per-share at 15% a year over the last decade.

The company’s historical growth – and much of its future growth potential – come from W.W. Grainger’s slow consolidation of the fragmented MRO industry in North America. W.W. Grainger is the industry leader in North America, yet it controls just 6% if the United States MRO market and 8% of the Canadian MRO market. The image below shows W.W. Grainger’s market share by region:

Source: 

With its small market share relative to the large MRO market, W.W. Grainger has many decades of growth ahead.

The company’s well-established supply chain gives it a strong competitive advantage. W.W. Grainger can offer next day ground delivery to more than 95% of its customers in North America.