Fastenal Company (NASDAQ:FAST) is a wholesale distributor of building and construction supplies: bolts, screws, nuts, anchors, washers, sockets … you name it. According to its website, Fastenal also sells safety gear and tools. The company has been in business for over 50 years and on the Nasdaq for 30 years. Why am I telling you this? Well, shares of FAST stock jumped double digits on Wednesday alone, while shares have gained almost 15% over the last week.
A year ago, Fatsenal was posting steady upward momentum, but it had been struggling in 2018 until last week’s recovery. Still, I like FAST stock.
I’m a believer in the idea that seemingly boring companies often make the best investments and that understanding a company’s business and industry is important — two things that aren’t cryptic for a pick like FAST.
Three Things to Know About FAST Stock
1. Q2 numbers: Earlier this week, Fastenal reported earnings. For the first six months of the year, sales increased by 13%, while net earnings expanded by 36% compared to the comparable period of 2017. Management cited strong demand for the growth. The company also increased active Onsite locations by 26% and industrial vending devices by 7% — two areas management calls its “growth drivers.”
2. The dividend: Fastenal also announced a raised dividend from 37-cents-per-share to 40-cents-per-share. However, that is basically helping the dividend keep up with the increase in the stock price. Prior to this week’s earnings report, the annual dividend totaled $1.48-per-share, which was a yield close to 3.1%. As of mid-day Friday, the new $1.60-per-share annual dividend was yielding just shy of 2.9%. Still, management has consistently upped the quarterly payout for the last five years.
3. The future: Looking forward, Fastenal is expected to grow earnings by 11% each year over the next five years. Analysts have been hiking their estimates for the company’s earnings in the coming quarters and years, too. That bottom-line growth should come on the back of 12% top-line growth this year and 8% sales growth in 2019.
Right now, the median price target for analysts is more or less the stock’s current level. But I think that’s because Wall Street just hasn’t had the time to catch up with FAST stock’s recent, unexpected pop. I also think some of that pop could be attributed to short sellers covering their position; currently 8% of the float is held short.
But that doesn’t mean those gains weren’t still warranted organically. Fastenal stock is currently just a few dollars away from some resistance at its 52-week high. But once it breaks through that, I expect gains to continue. Organic double-digit growth and an almost-3% dividend yield is a pretty appealing combination — especially with a technical breakthrough likely on the way.
As of this writing, Robert Martin did not hold a position in any of the aforementioned securities.
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