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Grainger Can Grow Dividend Despite Amazon Threat

Though the narrow-moat distributor may not have the pricing power it once had, we think it can maintain high single-digit dividend growth.

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Brian Bernard: W.W. Grainger began paying a regular dividend in 1971 and has increased its dividend every year since. The so-called dividend aristocrat currently offers just over a 3% dividend yield versus the S&P 500 with just under a 2% yield.

Grainger is one of the largest and most-well-known industrial distributors in the U.S. The company's business model--which we think benefits from a cost advantage, customer switching costs, and a network effect--has been the source of the company's historically enviable profitability, free cash flow generation, and dividend growth.

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Brian Bernard does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.