Fastenal (NASDAQ:FAST) Will Pay A Larger Dividend Than Last Year At US$0.31

Simply Wall St
January 22, 2022
Source: Shutterstock

Fastenal Company (NASDAQ:FAST) will increase its dividend on the 2nd of March to US$0.31. Based on the announced payment, the dividend yield for the company will be 2.0%, which is fairly typical for the industry.

View our latest analysis for Fastenal

Fastenal's Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. The last payment was quite easily covered by earnings, but it made up 116% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Over the next year, EPS is forecast to expand by 10.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 72% by next year, which is in a pretty sustainable range.

NasdaqGS:FAST Historic Dividend January 22nd 2022

Fastenal Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The first annual payment during the last 10 years was US$0.26 in 2012, and the most recent fiscal year payment was US$1.24. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see Fastenal has been growing its earnings per share at 13% a year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Fastenal will make a great income stock. While Fastenal is earning enough to cover the payments, the cash flows are lacking. We don't think Fastenal is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 13 analysts we track are forecasting for Fastenal for free with public analyst estimates for the company. We have also put together a list of global stocks with a solid dividend.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.