Updated 3/10/25
Graco Inc. (NYSE: GGG) is a well-established name in the industrial sector, specializing in fluid handling systems used across multiple industries. From construction and automotive to manufacturing and lubrication, Graco’s products are essential to many operations. While it may not be the most exciting business, its ability to generate steady revenue and return capital to shareholders makes it an intriguing option for dividend investors.
For those focused on dividend income, Graco offers reliability, but with a relatively low yield. The real appeal here is its history of consistent dividend growth, supported by strong financials and a disciplined approach to capital allocation.
Before diving deeper, here are some key dividend metrics to keep in mind.
Key Dividend Metrics
💰 Forward Dividend Yield: 1.26%
📈 5-Year Average Dividend Yield: 1.15%
📆 Ex-Dividend Date: April 14, 2025
🎯 Payout Ratio: 36.17%
💵 Annual Dividend Per Share: $1.10
🔄 Dividend Growth Streak: 25+ years
📊 Dividend Growth Rate (5-Year Avg): ~8-10%
🏦 Financial Strength: Minimal debt, strong cash flow
Dividend Overview
Graco follows a classic pattern among high-quality industrial stocks: a relatively modest yield but a strong commitment to annual dividend increases. At 1.26%, its yield isn’t going to grab headlines, but what it lacks in immediate income, it makes up for in long-term growth.
The company’s payout ratio of 36.17% is conservative, ensuring there’s plenty of room for continued dividend hikes. The upcoming ex-dividend date is set for April 14, 2025, meaning investors need to own shares before then to receive the next payment.
While this may not be the best stock for those seeking high yields today, Graco has built a reputation for steadily increasing dividends, rewarding patient investors over time.
Dividend Growth and Safety
Graco has a long history of raising its dividend consistently. Over the past five years, its dividend growth rate has hovered around 8-10%, making it an appealing choice for investors who prioritize growing their income over time.
How Safe Is Graco’s Dividend?
✔ Low payout ratio (36.17%) – Well within a safe range, leaving room for future increases.
✔ Strong cash flow ($621.7M in operating cash flow) – The company has no trouble funding dividends.
✔ Minimal debt (Debt/Equity ratio of 1.88%) – A very low level of debt compared to industry peers.
✔ Consistent earnings – While revenue saw a small decline (-3.2% year over year), profitability remains solid.
With $675 million in cash and virtually no debt concerns, Graco’s dividend appears safe for the foreseeable future.
Chart Analysis
Price Action and Trend
Graco Inc. (GGG) has been in a choppy yet gradually improving trend. The price recently closed at $87.54, which is near the upper end of its recent range. Over the past year, the stock has experienced significant swings, moving from lows around $77.50 to highs approaching $95 before pulling back.
Currently, the price has rebounded from a recent dip and is making a push toward prior resistance levels. The 50-day moving average (light blue line) is attempting to stay above the 200-day moving average (dark blue line), which is an encouraging sign for potential bullish momentum. However, the stock remains close to this key area, and a decisive move higher or lower will dictate the next leg of action.
Moving Averages
The 50-day moving average is trending slightly upward, showing that shorter-term momentum has improved. Meanwhile, the 200-day moving average remains flatter, reflecting a more neutral long-term trend. These two averages recently crossed paths multiple times, suggesting a market that is still deciding its direction.
If the price can remain above the 200-day moving average, it would be a positive technical signal. On the other hand, if it slips below, it could signal a continuation of the range-bound action that has defined the past several months.
Volume Activity
Volume levels are steady, with occasional spikes indicating periods of higher trading interest. Notably, there were strong volume surges in October and December, likely representing institutional buying or selling activity. These high-volume days coincided with larger price swings, suggesting that major players were involved.
In the most recent trading days, volume has been moderate, showing that the latest price movement isn’t necessarily fueled by excessive buying or selling pressure. A significant increase in volume alongside a breakout above recent highs would be a more convincing bullish signal.
RSI and Momentum
The Relative Strength Index (RSI), displayed in the lower section of the chart, is trending upwards but remains in a neutral zone. This suggests that the stock is neither overbought nor oversold, leaving room for movement in either direction.
The RSI dipped into oversold levels several times last year, coinciding with price bottoms, and has since climbed back toward mid-range levels. If the RSI approaches 70, it could indicate that the stock is becoming overextended to the upside, while a drop toward 30 could signal a potential buying opportunity.
Recent Candlestick Action
The last few candlesticks show a range-bound movement, with both upper and lower wicks indicating indecision. The stock attempted to push higher but faced some resistance, as seen in the upper wicks. At the same time, buyers stepped in to support the price near its recent lows.
This type of action often suggests that traders are waiting for a catalyst to drive the next move. If the stock can hold above the $85 range, it may gain enough momentum to push higher, but if sellers step in aggressively, another test of support could be in store.
Analyst Ratings
📊 Upgrades
🔼 BNP Paribas Exane upgraded Graco from Neutral to Outperform, adjusting the price target from $80 to $105. This move was driven by the firm’s increased confidence in Graco’s market positioning and long-term growth potential. Analysts highlighted the company’s ability to maintain strong margins despite recent macroeconomic pressures.
🔼 RBC Capital raised its price target for Graco from $93 to $97, maintaining an Outperform rating. Following discussions with Graco’s CFO, RBC expressed optimism about the company’s valuation and strategic direction. The firm emphasized Graco’s solid balance sheet and ability to navigate industry challenges while still delivering consistent dividend growth.
📉 Downgrades
🔽 Baird downgraded Graco from Outperform to Neutral, setting a price target of $61. Analysts cited concerns over valuation and broader industrial sector headwinds. While acknowledging Graco’s stability, they noted that the stock’s recent run-up had priced in much of its expected growth.
🔽 Goldman Sachs lowered its price target on Graco from $67 to $63, maintaining a Neutral rating. Analysts pointed to potential pressures on market multiples and broader economic uncertainty as reasons for the adjustment. While Graco’s fundamentals remain strong, they cautioned that industrial demand trends could lead to near-term volatility.
🎯 Consensus Price Target
The current 12-month consensus price target for Graco sits around $93, reflecting a mix of optimism about its operational strengths and some caution regarding economic conditions. This target suggests moderate upside from recent price levels, as analysts weigh steady dividend growth against industry headwinds.
These ratings highlight the importance of considering multiple viewpoints when evaluating Graco’s investment potential. With a history of consistent performance and dividend increases, the stock remains a focus for long-term investors while facing near-term valuation concerns.
Earning Report Summary
Graco’s latest earnings report showed a bit of a mixed bag, with some challenges in sales but a steady financial foundation. In the fourth quarter ending December 27, 2024, the company pulled in $548.7 million in revenue, which was down 3% from the previous year. That decline wasn’t unexpected, as all regions felt a bit of a slowdown. However, recent acquisitions actually helped offset some of that drop, contributing about 3 percentage points to growth. If you strip those out, organic sales were down about 6%, which signals some softness in demand.
Profit margins took a bit of a hit, dipping by 2 percentage points compared to last year. Part of that was due to the costs associated with the company’s newly acquired businesses. Meanwhile, operating expenses jumped 15%, adding about $19 million in costs. This was largely driven by litigation expenses, restructuring efforts, and the integration of those new acquisitions, each accounting for around $7 million in added spending.
When it comes to earnings, operating profits came in at $130 million, a 23% decline from last year. However, the bottom line wasn’t as rough as it could have been—net income only slipped by 1% to $108.7 million, thanks in part to some favorable tax adjustments that helped cushion the impact.
Looking at the full-year picture, 2024 revenue totaled $2.11 billion, a 4% drop from the previous year. Operating earnings also declined, down 12% to $570.1 million. Despite this, Graco remains optimistic about the road ahead, projecting low single-digit sales growth in 2025 on an organic basis.
One of the biggest structural changes is that the company has reorganized into three core business segments: Contractor, Industrial, and Expansion Markets, effective January 1, 2025. This restructuring is meant to sharpen focus and improve operations, allowing each segment to grow in a more targeted way.
Overall, while the numbers weren’t spectacular, they weren’t a disaster either. The company is dealing with some near-term headwinds, but its long-term strategies, acquisitions, and restructuring efforts suggest that it’s planning for sustainable growth moving forward.
Financial Health and Stability
One of Graco’s greatest strengths is its financial stability. The company operates with a profit margin of 23% and an operating margin of 23.63%, which are strong numbers for an industrial manufacturer. Even as revenue growth has slowed slightly, the company continues to generate excellent return on equity (20.22%) and return on assets (12.09%), showing that it uses capital effectively.
A current ratio of 3.69 indicates that Graco has ample liquidity, meaning it can cover its short-term obligations with ease. The company’s financial discipline is one of the key reasons why it has been able to consistently grow its dividend without taking on excessive risk.
Valuation and Stock Performance
Graco’s stock has historically traded at a premium valuation, and that trend continues today. With a trailing P/E ratio of 31.04 and a forward P/E of 29.07, shares aren’t cheap compared to other industrial stocks.
Currently trading at $87.56, the stock is within its 52-week range of $77.49 – $94.77. It has underperformed the broader market over the past year, lagging behind the S&P 500’s 12.74% gain. However, for long-term investors, short-term price movements matter less than the company’s ability to generate cash and return capital to shareholders.
Here’s how its valuation looks based on different metrics:
🔹 Price/Sales: 7.14 – Higher than most industrial peers, reflecting strong margins.
🔹 Price/Book: 5.74 – A bit elevated, but common for high-quality dividend growers.
🔹 Enterprise Value/EBITDA: 20.93 – Indicates a premium but aligns with top-tier industrial stocks.
For investors looking for a bargain, Graco might seem expensive right now. However, those who prioritize financial stability and consistent dividend growth may find the premium justifiable.
Risks and Considerations
No stock is without risk, and Graco is no exception. Here are a few things to keep in mind:
🚧 Slowing Revenue Growth – The company reported a 3.2% decline in quarterly revenue year over year. If this trend continues, it could impact earnings growth.
🚧 Valuation Risk – With a P/E ratio above 30, the stock is priced for perfection. Any earnings miss could lead to a pullback.
🚧 Modest Dividend Yield – At just 1.26%, the current yield may not be attractive for income-focused investors seeking higher payouts.
Despite these risks, Graco’s core business remains strong, and its financial position provides a buffer against short-term headwinds.
Final Thoughts
Graco is a prime example of a dividend growth stock—it may not offer the highest yield today, but its track record of steady increases and financial strength make it a solid long-term investment.
With a 25+ year dividend growth streak, a conservative payout ratio, and strong cash flow, the company is well-positioned to continue rewarding shareholders. However, its premium valuation and slowing revenue growth are factors to consider before making an investment decision.
For those who value stability, disciplined financial management, and a growing income stream over time, Graco remains a strong contender in the industrial sector.
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