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What Changed W.W. Grainger’s Dividend Yield Graph?

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Dec. 4 2020, Updated 10:53 a.m. ET

Sales and EPS performance

W.W. Grainger (GWW) recorded a 2.0% net sales growth in 2016 after flat growth in 2015. Other businesses drove the 2016 growth, offset by the United States and Canada. The 2015 performance was attributable to the United States and other businesses, offset by Canada. All three segments drove the 2.0% rise in the first half of 2017.

W.W. Grainger recorded a 15.0% fall in EPS (earnings per share) for 2016 after a 1.1% rise in 2015. EPS in 2015 was affected by slower revenue growth, higher operating and interest expenses, and a loss from equity method investments. Higher operating and interest expenses and a loss from equity method investments led to the fall in EPS in 2016. EPS fell 20.0% in the first half of 2017 for the same reasons. Share buybacks enhanced EPS. The company generates enough free cash flow to cover its dividend obligations.

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Dividend trajectory

W.W. Grainger’s dividend yield curve saw a flat downward slope between 2015 and 2016 due to rising prices, which offset dividend growth. An upward dividend yield curve was observed between 2016 and 2017 due to growth in dividends and a fall in prices.

The company has a dividend yield of 2.8%, and its prices have fallen 23.5% on a YTD (year-to-date) basis. That compares to a dividend yield of 2.3% and a YTD price gain of 15.2% for the Dow Jones Industrial Average (DJIA-INDEX) (DIA). The S&P 500 (SPX-INDEX) (SPY) has a dividend yield of 2.3% and a YTD price gain of 13.6%. The Nasdaq Composite (COMP-INDEX) (ONEQ) has a YTD price gain of 22.2%.

The SPDR S&P Dividend ETF (SDY) is a dividend ETF with exposure to W.W. Grainger. The ETF has a 2.4% dividend yield and a PE (price-to-earnings) ratio of 20.0x. The First Trust Value Line Dividend ETF (FVD) is a dividend ETF with exposure to W.W. Grainger. The ETF has a 2.1% dividend yield and a PE ratio of 20.4x.

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