Last update on 2024-06-27

Fastenal (FAST) - Dividend Analysis (Final Score: 7/8)

Analyze Fastenal (FAST) with an 8-criteria system to assess dividend stability and performance. Achieve a 7/8 score and explore key factors affecting dividends.

Short Analysis - Dividend Score: 7

We're running Fastenal (FAST) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

Fastenal (FAST) has been evaluated on eight criteria related to its dividend performance and stability, achieving a high Dividend Score of 7 out of 8. The company's dividend yield is significantly above the industry average, with a strong 20-year growth trend. Its payout ratio is well within sustainable limits, averaging 56.57%, although it has occasionally peaked. Dividends are well-covered by both earnings and cash flow, showing resilience even in challenging years. Fastenal has paid stable dividends for over 25 years and has consistently repurchased shares, enhancing shareholder value. However, there have been occasional years with negative dividend growth, impacting overall stability.

Insights for Value Investors Seeking Stable Income

Given Fastenal's strong dividend yield, consistent growth over two decades, and resilient payout strategies, it is a solid investment for those seeking reliable and growing dividend income. Its commitment to long-term dividends and share repurchases further boosts its appeal. Despite occasional fluctuations, the overall trend is positive. Therefore, Fastenal is recommended for investors focusing on dividend stability and growth.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield represents the dividend-income return on investment for shareholders.

Fastenal's current dividend yield of 2.7482% is notably higher than the industry average of 1.36%, which is a positive sign. Over the past 20 years, Fastenal has consistently maintained a dividend yield that often exceeds the industry average. The company's closing stock price has grown substantially from $6.2188 in 2003 to $64.77 in 2023, indicating strong price appreciation alongside healthy dividend payouts. This consistency and growth make Fastenal an attractive option for dividend-focused investors. The trend is favorable.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate (DGR) indicates the annualized percentage growth rate of a company's dividends over a specific period, usually spanning several years. It's a critical metric for long-term investors who rely on dividend income, as it underscores the sustainability and consistency of a company's dividend payout policy.

Fastenal (FAST) has exhibited varying dividend growth rates over the past 20 years, with notable fluctuations in some years. The average DGR stands at approximately 42.24%, which indicates an overall healthy pattern of dividend increases, with years of exceptionally high growth more than compensating for occasional declines or slower growth periods. However, there are a few negative growth years, such as 2009 (-8.8608%) and 2021 (-20%), which suggest some volatility. Despite these anomalies, the long-term average significantly exceeds the 5% threshold, implying a robust and generally upward trajectory in shareholder returns. This is a good trend for investors valuing consistent and growing dividend income, though they should be attuned to the occasional year of downside.

Average annual Payout Ratio lower than 65% in the last 20 years?

The payout ratio is a key indicator for dividend sustainability and shows how much of its earnings a company is paying out in dividends.

Fastenal (FAST) has maintained an average payout ratio of 56.57% over the last 20 years. This ratio is comfortably below the 65% threshold, indicating a conservative approach to dividend payments relative to earnings. This conservative payout policy suggests that Fastenal is likely maintaining sufficient earnings to reinvest in its operations, thereby supporting both growth and dividend sustainability. However, occasional spikes above 65% (like in 2012, 2020, and 2023) merit attention, as persistently high payout ratios could stress a company's finances.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings

Fastenal's trend showcases an interesting interplay between Earnings Per Share (EPS) and Dividend Per Share (DPS). In 2003, the EPS was $0.1386 with a DPS of $0.0262, making the dividend coverage ratio quite robust at 0.189. Over the years, both EPS and DPS have shown a generally upward trend, demonstrating the company’s consistent profitability and shareholder friendliness. However, the coverage ratio fluctuated, peaking notably in 2012 at 0.876. A high dividend coverage ratio suggests that the dividend payouts are comfortably covered by the earnings, leaving ample earnings for reinvestment or to buffer against downturns. Although the trend predominantly hovers around mid-value coverage, Fastenal's ability to maintain dividends even in financially tight years such as 2009 (0.581 coverage) underscores their strong commitment to shareholder returns. As of 2023, with an EPS of $2.0218 and a DPS of $1.78, the coverage ratio stands at 0.880, indicating dividends are well covered and signaling financial health and stability. Thus, this trend can be considered positively, reflecting robust financial management.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow means that a company's free cash flow exceeds its dividend payouts, indicating that the dividends are sustainable.

From 2003 to 2023, Fastenal's free cash flow has generally covered its dividend payouts adequately. Ratio values above 1 in several years like 2004, 2010, 2011, 2012, 2021 reveal excellent coverage. More challenging years like 2003, 2005, 2007 see values below 1, indicating weaker coverage. On average, the trend is positive, suggesting good sustainability in recent years, though 2023's lower ratio demands closer scrutiny.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments, where the dividend per share did not drop by more than 20% over the past two decades, is crucial for income-seeking investors because it indicates consistent profitability and prudence in financial management.

Based on the provided data, Fastenal (FAST) has shown a very stable trend in its dividend payments over the last 20 years. The dividend payment has steadily increased from $0.0262 in 2003 to $1.78 in 2023. There is no year where the dividend per share dropped by more than 20%. This consistently upward trend showcases Fastenal's robust financial health and commitment to returning value to shareholders, making it an attractive option for income-seeking investors.

Dividends Paid for Over 25 Years?

Dividends paid for over 25 years demonstrate the company's long-term commitment to returning value to shareholders.

Fastenal (FAST) has shown a consistent commitment to its shareholders by paying dividends for over 25 years, as evidenced by its dividend history from 1998 to 2023. Over this period, dividends per share have increased from $0.0013 in 1998 to $1.78 in 2023. This long-term trend highlights the strength and stability of Fastenal’s financial performance. Such a consistent and growing dividend payout is a positive indicator for investors seeking reliable income and can be a sign of healthy cash flow and sustained earnings. Therefore, this trend is good for evaluating the company's historical commitment to dividends and appeals to long-term investors.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable Stock Repurchases Over the Past 20 Years

Analyzing Fastenal's (FAST) share repurchases over the past 20 years shows varying trends. From 2005 to 2023, there has been a general downward trend in the number of shares outstanding, indicating consistent share repurchases, albeit with some fluctuations. Fastenal repurchased shares effectively in multiple years: 2005, 2006, 2007, 2008, 2010, 2014, 2015, 2016, 2017, 2018, 2019, 2022, and 2023. This shows a strategic effort in returning value to shareholders, as the average repurchase rate over these two decades was -0.3025%. Hence, this trend demonstrates a positive attempt by Fastenal to maintain or increase shareholder value through regular stock buybacks, even if not annually perfect. This behavior is favorable for long-term investors seeking capital appreciation and dividend-growth, as reduced share count typically leads to higher EPS (Earnings Per Share) and potentially higher dividend payouts.