GGG Dividend Scorecard

Core Viewpoint - Graco has demonstrated a strong commitment to returning cash to shareholders through consistent dividend payments, achieving a 27-year track record with a 9.4% five-year compound annual growth rate in dividends, despite a modest current yield of 1.19% [1][2] Dividend Profile - Graco paid a quarterly dividend of $0.295 per share, marking a 7.3% year-over-year increase from $0.275 in Q1 2025 [1] - The company's payout ratio stands at 26.8%, indicating a sustainable dividend policy supported by strong cash flow [1] - Graco's dividend yield is lower than that of traditional income stocks, such as AT&T (4.05%) and Verizon (5.77%), but offers higher growth potential [1] Financial Foundation - Graco generated $683.6 million in operating cash flow in fiscal 2025, with a dividend payout of $183.4 million, resulting in a coverage ratio of 3.7x [1] - The company reported a net income of $521.8 million on revenue of $2.24 billion, achieving a net profit margin of 23.3% [1] - Free cash flow amounted to $637.9 million after capital expenditures, leaving $454.6 million available for shareholder returns [1] Peer Comparison - Compared to Bristol Myers Squibb, which has a higher yield of 4.09% but faces patent cliff concerns, Graco's strategy focuses on consistent dividend growth [1] - CVS Health maintained a dividend yield of 3.51% but lowered its cash flow guidance, highlighting the risks associated with high yields in challenging industries [1] - AbbVie and American Tower also provide higher yields but come with specific industry risks [1] Valuation and Total Return Context - Graco trades at 31x trailing earnings and 30x forward earnings, reflecting market confidence but limiting margin of safety for dividend investors [1] - The stock has delivered a total return of 13.45% over the past year and 16.66% year-to-date through February 12, 2026 [1] - An investor who purchased Graco five years ago has seen a stock price increase of 41.05% alongside steadily increasing dividends [1] Sustainability Verdict - Graco's dividend sustainability is supported by a low payout ratio, strong net margins, and minimal interest expenses, indicating a healthy balance sheet [1] - Management's outlook for Q4 2025 remains optimistic, suggesting confidence in future cash generation [2] - The company has the capacity and track record to continue its dividend growth strategy, appealing to dividend growth investors [2]