Grainger Generates Five Dollars of Cash for Every Dollar Paid to Shareholders

Core Viewpoint - W.W. Grainger Inc. has demonstrated exceptional dividend safety with a 53-year history of consecutive dividend increases, supported by strong cash flow and low payout ratios, positioning it as a reliable investment for income-focused investors [5][12]. Financial Metrics - The annual dividend is $8.62 per share, yielding 0.89% [5][13]. - Operating cash flow for 2024 was $2.11 billion, with dividend payments totaling $421 million, resulting in a coverage ratio of 5.0x [5][12]. - Free cash flow for 2024 was $1.57 billion after capital expenditures of $541 million, covering the dividend 3.7 times [5][12]. Payout Ratios - The free cash flow payout ratio is 27%, indicating substantial room for dividend growth or economic downturns [6][12]. - The earnings payout ratio stands at 24%, reflecting a healthy distribution of earnings to shareholders [6][7]. Dividend Growth History - Grainger has increased its dividend every year since 1972, with a five-year compound annual growth rate of approximately 6% [8]. - Total dividend payments rose from $316 million in 2018 to $421 million in 2024, marking a 33% increase over six years [8][9]. Recent Dividend Payments - In 2024, total dividends paid were $421 million, a year-over-year increase of 7.4% [9]. - The company has consistently raised dividends, even during economic downturns such as the 2008 financial crisis and the 2020 pandemic [9]. Shareholder Returns - In 2024, Grainger returned $1.62 billion to shareholders through dividends and share repurchases, with dividends representing just 22% of free cash flow [11][12]. - The company maintains a strong return on equity of 46.7%, supporting continued dividend growth [12].