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Fastenal Company (NASDAQ:FAST) Will Pay US$0.40 In Dividends

Important news for shareholders and potential investors in Fastenal Company (NASDAQ:FAST): The dividend payment of US$0.40 per share will be distributed to shareholders on 21 November 2018, and the stock will begin trading ex-dividend at an earlier date, 23 October 2018. Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let’s take a look at Fastenal’s most recent financial data to examine its dividend characteristics in more detail.

View our latest analysis for Fastenal

5 questions to ask before buying a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

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  • Is it the top 25% annual dividend yield payer?

  • Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?

  • Has dividend per share amount increased over the past?

  • Is its earnings sufficient to payout dividend at the current rate?

  • Based on future earnings growth, will it be able to continue to payout dividend at the current rate?

NasdaqGS:FAST Historical Dividend Yield October 18th 18
NasdaqGS:FAST Historical Dividend Yield October 18th 18

How does Fastenal fare?

The current trailing twelve-month payout ratio for the stock is 57%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 58%, leading to a dividend yield of around 3.3%. In addition to this, EPS should increase to $2.75.

When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.

If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. In the case of FAST it has increased its DPS from $0.27 to $1.6 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes FAST a true dividend rockstar.

Relative to peers, Fastenal has a yield of 3.0%, which is high for Trade Distributors stocks but still below the market’s top dividend payers.

Next Steps:

Taking into account the dividend metrics, Fastenal ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three important factors you should further examine:

  1. Future Outlook: What are well-informed industry analysts predicting for FAST’s future growth? Take a look at our free research report of analyst consensus for FAST’s outlook.

  2. Valuation: What is FAST worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether FAST is currently mispriced by the market.

  3. Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.