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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.

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