Dividend Aristocrats In Focus: Fastenal Co.

Up to date on February eighth, 2025 by Felix Martinez

The Dividend Aristocrats encompass S&P 500 corporations which have raised their dividends for not less than 25 years in a row. The listing modifications annually as new corporations are added (and infrequently eliminated when streaks finish).

Fastenal Co. (FAST) was the one addition to the Dividend Aristocrats listing in 2024.

You may see the complete listing of all 69 Dividend Aristocrats right here.

We created a full listing of all Dividend Aristocrats, together with vital monetary metrics like price-to-earnings ratios and dividend yields. You may obtain your copy of the Dividend Aristocrats listing by clicking on the hyperlink under:

Disclaimer: Positive Dividend shouldn’t be affiliated with S&P International in any manner. S&P International owns and maintains The Dividend Aristocrats Index. The data on this article and downloadable spreadsheet relies on Positive Dividend’s personal overview, abstract, and evaluation of the S&P 500 Dividend Aristocrats ETF (NOBL) and different sources, and is supposed to assist particular person buyers higher perceive this ETF and the index upon which it’s based mostly. Not one of the data on this article or spreadsheet is official information from S&P International. Seek the advice of S&P International for official data.

Fastenal elevated its dividend final yr for the twenty sixth consecutive yr. On January sixteenth, 2025, Fastenal raised its quarterly dividend by 10.3%, from $0.39 to $0.43.

This text will talk about the newest addition to the Dividend Aristocrats listing in larger element.

Enterprise Overview

Fastenal started in 1967 when Bob Kierlin and 4 mates pooled collectively $30,000 to open the primary retailer. The unique intent was to dispense nuts and bolts through merchandising machine, however that concept obtained off the bottom after 20 years.

The corporate went public in 1987 and right now supplies fasteners, instruments, and provides to its clients through 1,592 public branches, 1,872 energetic Onsite areas, and over 115,000 managed stock units.

Fastenal has a market capitalization of $42.3 billion.

Fastenal reported (1/17/25) monetary outcomes for the fourth quarter and full-year outcomes for fiscal 2024 in January. The corporate confirmed reasonable progress in gross sales regardless of a difficult industrial surroundings. Annual internet gross sales elevated by 2.7% to $7.55 billion, whereas fourth-quarter gross sales rose 3.7% to $1.82 billion. Day by day gross sales improved by 1.9% for the yr and a couple of.1% for the quarter. Nevertheless, profitability declined barely, with internet earnings down 0.4% to $1.15 billion for the yr and 1.6% to $262.1 million for the quarter. Gross revenue margins softened resulting from unfavorable buyer and product combine, greater transport prices, and elevated import duties.

An enlargement in Onsite areas and digital initiatives, together with FMI Expertise and eBusiness drove progress. Fastenal added 358 new Onsite areas in 2024, bringing the whole to 2,031, and FMI gross sales grew 8.5% year-over-year. Digital gross sales, together with eProcurement and eCommerce, elevated considerably, making up 62.2% of whole gross sales in This autumn. Nevertheless, the fastener section underperformed, reflecting weak industrial manufacturing, whereas security and MRO-related merchandise confirmed resilience.

Working bills rose quicker than gross sales, with SG&A prices growing 6.2% in This autumn resulting from greater worker wages, medical health insurance prices, and occupancy bills. A slowdown in manufacturing exercise and sharp manufacturing cuts in December contributed to decrease effectivity. Trying forward, Fastenal goals to proceed its digital enlargement, enhance effectivity, and adapt to evolving industrial demand.

Supply: Investor Presentation

Development Prospects

Fastenal has grown its earnings-per-share at a ten.2% common annual fee during the last decade and at a 9.0% common annual fee during the last 5 years. This has been pushed by a wide range of components, together with gross sales greater than doubling, an enchancment in margins and tax reform.

The COVID-19 pandemic impacted many companies, however Fastenal proved resilient in 2020. The normal enterprise confronted challenges, however the Security section greater than offset misplaced gross sales. We anticipate 7% progress of earnings-per-share over the following 5 years.

Fastenal is within the midst of a metamorphosis from the normal public branches main the enterprise to Onsite areas and managed stock (largely merchandising units) heading the expansion story.

We consider this can be a prudent transfer, establishing stickier relationships with clients. That is very true since solely a small fraction of the corporate’s enterprise is from walk-in clients whereas the bulk is completed business-to-business.

Supply: Investor Presentation

Aggressive Benefits & Recession Efficiency

Fastenal has a first-mover aggressive benefit in its industrial merchandising and Onsite areas, creating a really sticky and well-attuned buyer relationship with excessive switching prices.

Furthermore, its scale permits the corporate to proceed its progress path, alter to enterprise preferences, and reliably ship wanted items.

You may see Fastenal’s earnings-per-share through the Nice Recession under:

• 2007 earnings-per-share: $0.39
• 2008 earnings-per-share: $0.48
• 2009 earnings-per-share: $0.31
• 2010 earnings-per-share: $0.45

Earnings declined through the worst of the recession, however the firm remained worthwhile. This saved the dividend rising throughout that interval.

Whereas we observe some cyclical potentialities within the building business, up to now, the corporate has confirmed itself to be well-prepared to endure monetary storms.

We observe that the dividend payout ratio is elevated at 80% for 2025, however we consider that is cheap contemplating the debt-free stability sheet.

Valuation & Anticipated Returns

Based mostly on the anticipated adjusted EPS of $2.15 for fiscal 2025, Fastenal inventory is at present buying and selling at 34.3 instances its anticipated EPS. The earnings a number of is above our truthful worth estimate at 24 instances earnings.

This suggests a 6% annual headwind ought to it attain 24 instances earnings over the following 5 years. The anticipated earnings progress will offset the decline, which we estimate at 7% per yr.

Fastenal inventory additionally has a present dividend yield of two.3% per yr. Due to this fact, we challenge whole annual returns of three.3% over the following 5 years.

Remaining Ideas

Fastenal has confirmed to be an excellent firm with constant earnings and dividend progress. Furthermore, it’s executing strikes to higher cement itself as a go-to provider.

Nevertheless, the inventory has greater than doubled previously 5 years, and has develop into overvalued. We anticipate the inventory to generate a 3.3% common annual whole return over the following 5 years. The inventory maintains its maintain ranking.

Moreover, the next Positive Dividend databases include essentially the most dependable dividend growers in our funding universe:

In case you’re searching for shares with distinctive dividend traits, take into account the next Positive Dividend databases:

The foremost home inventory market indices are one other stable useful resource for locating funding concepts. Positive Dividend compiles the next inventory market databases and updates them month-to-month: