pidjoe/iStock Unreleased via Getty Images Why does Paccar beat the market? How do we beat the S&P 500 ( SPY )? A simple strategy is to be overweight on the top 10 names. But what if we want to selectively pick our stocks independently from the market cap, but solely base our choice on fundamentals? Paccar ( NASDAQ: PCAR ) is a stock that has beaten the index over the past five years and its shares have delivered a total return close to 160% while the S&P 500 is just above 100%. Interestingly, Paccar is not a big tech name and it is not related to the AI-boom.
In fact, Paccar runs an old-fashioned business: it manufactures trucks, with most of them being old ICE trucks. Data by YCharts Don't gasp. Of course, Paccar has been developing electric trucks.
So, don't worry, it won't go out of business soon. But, if we look at its sales mix, e-trucks are still a very tiny portion of the overall company. While manufacturing and selling trucks, Paccar has grown a reputation as a strong dividend payer (it has paid a dividend since 1941) that has chosen a low yield and a low payout ratio (1% and 11% respectively) then to issue a special dividend at the end of each year which makes the real yield go up to 4-5%.
In this way, Paccar can safely keep up its regular dividend growth trajectory, while returning to its shareholders part of the excess free cash flow the company generates each year based on its internal execution and external market conditions. Why has a company such as Paccar, cle.