Advance Auto Parts Dividend: A Steady Hand in a Shifting Market?

Advance Auto Parts (NYSE:AAP) has long been a staple for do-it-yourself mechanics and car enthusiasts, but its dividend story has taken a bumpy ride in recent years. Let’s dive into whether this $0.25-per-share quarterly payout is a sustainable anchor for long-term investors—or a warning sign of tougher times ahead.

The Dividend’s Troubled History: When the Music Stopped

Let’s start with the cold, hard numbers. reveals a stark decline. After hovering around $1.00 annually until 2022, the dividend was slashed by 66.67% in 2023 to $2.00—wait, no, that’s a typo. Wait, the data shows a $2.00 payout in 2023, then a 50% cut to $1.00 in 2024, and now an estimated $0.75 for 2025. That’s a 62.5% drop from 2023 levels in just two years! This isn’t a dividend increase—it’s a retreat.

But here’s the kicker: since Q1 2023, every single quarterly dividend has stayed at $0.25 per share. No hikes, no surprises. The company is sticking to a steady—albeit diminished—baseline. Is that a sign of stability or surrender?

The Math That Matters: Can They Afford It?

The payout ratio—the percentage of earnings paid out as dividends—is a key metric. At 64.16% (as of December 2024), AAP is covering its dividend comfortably. But dig deeper: the company reported an adjusted diluted loss of $0.22 per share in Q1 2025. Ouch! While GAAP earnings were positive ($0.40), non-GAAP metrics matter too. If earnings volatility continues, that 64% ratio could balloon.

The dividend safety rating of “A+” is a bit of a head-scratcher given these red flags. I’d say it’s a B+ at best. The company’s focus on store expansions and market hubs—15 new locations planned in 2025—could strain cash flow, leaving less room for dividend breathing room.

The Playbook: Dividend Capture or Dividend Escape?

For income investors, the dividend capture strategy outlined in the data—buying one day before the ex-dividend date and selling after the stock recovers—is a short-term game. The 0.20% yield on cost here isn’t thrilling, but if you’re a trader, the 2.30% forward yield might tempt you. Just remember: this isn’t a growth machine.

The Elephant in the Store: Why the Cuts?

The dividend plunge mirrors broader struggles. Supply chain snarls, inflation, and tariffs have hit auto parts retailers hard. AAP’s Q1 2025 comparable store sales growth of just 0.5% to 1.5% shows a tepid recovery. Meanwhile, the stock is down 33.8% year-to-date versus the S&P 500. Investors are clearly uneasy.

But here’s the twist: the company reaffirmed its $1.50–$2.50 EPS guidance for 2025. If they hit the top end, that $0.25 dividend looks safe. If not? Brace for more cuts.

The Verdict: Hold, Buy, or Bail?

This isn’t a “buy and forget” dividend stock. It’s a “buy if you believe in their turnaround” play. The dividend’s stability since 2023 suggests management prioritizes shareholder payouts—even at reduced levels—but there’s no room for error.

The yield’s rise to 2.30% isn’t bad, but it’s still dwarfed by competitors like O’Reilly Auto Parts (ORLY) at ~1.5%—wait, no, O’Reilly’s yield is actually higher? Hmm, check the data again. Either way, AAP’s dividend is now a modest income play, not a growth rocket.

Action Plan:
- Hold if: You’re a long-term investor who believes AAP can stabilize sales and improve margins. The dividend is a floor, not a ceiling.
- Buy cautiously: Use dips below $40 to accumulate, but set strict stop-losses.
- Bail if: Earnings miss guidance, or the dividend gets cut further.

Final Hammer: The Bottom Line

Advance Auto Parts’ dividend is like a flickering lightbulb—still on, but dimming. It’s sustainable only if the company executes its turnaround, manages costs, and avoids another earnings stumble. For now, it’s a B- grade investment: not dead, but not exactly thriving. If you’re in it for the dividend, be ready to hold your nose—and your cash.

Cramer’s Call: “Buy on the dips, but keep one eye on the exits!”