The insiders and institutions are buying Fastenal (NASDAQ: FAST) and there is more reason than one to be bullish on the stock. The number 1 reason right now is the upcoming dividend declaration and payment that is expected in January 2023. If the company follows through on its trend and raises the distribution as expected it will mark the 25th consecutive distribution increase for this company. That is a feat that will attract long-term-oriented buy-and-hold dividend seekers but there is more. At 25 years the number of increases qualifies Fastenal as a Dividend Aristocrat and entitles it to all the associated perks.
The salient point here is that this high-quality blue-chip dividend growth stock is about to be included in one of if not the most closely watched, tracked, and copied dividend indexes on the planet and its ownership is going to broaden because of it. Not only will retail investors who track the Aristocrats become interested but all those ETFs and funds that track the Aristocrats will have to start buying too. What this means is a strong tailwind for share prices to go along with the safely growing dividend.
The Sell-Side Is Buying Fastenal
The sell-side of the market including insiders, institutions and analysts are either buying or holding Fastenal at this time and the bias for share prices is upward. The insiders only own 0.4% of the company but their activity is very telling. Aside from one VP who made the sole sale of stock in 2022, there are a half dozen insiders including 3 directors, the CEO, the CAO, and an EVP who’ve been buying over the course of the last 3 quarters. The single sale was for about $1.3 million which is a fraction of the market and offset by institutional activity.
The institutions have been net-buyers for 8 of the last 9 consecutive quarters and now own more than 78% of the stock. Large holders include Vanguard, BlackRock, State Street and Bank of New York Melon which control about 30% of the company collectively. The analysts are less sanguine on the name but even they are holding it. The consensus of the 7 analysts with current research is a Hold with a price target of $51.86. There has been a little movement in the price target in 2022, very little, but it is flat in the 30, 90 and 365-day comparisons and the sentiment is holding is steady as well.
Is Fastenal’s Dividend Worth It?
Fastenal is not a cheap stock trading at 27X its earnings but it is paying about twice the dividend of the S&P 500 and it is growing the distribution. The yield is running about 2.4% in 2022 and the CAGR is impressive as well but investors should expect it to fall in the coming years. The CAGR is near 15% with a near 65% payout ratio that suggests smaller increases are on the way. Even so, the payout and growth outlook is attractive relative to its peers although there are some trade-offs to be found. W.W. Grainger and Simpson Manufacturing both offer better value but pay half the yield or less. W.W. Grainger, however, is a Dividend King and Simpson comes with a healthier outlook for sustained distribution growth over the long term.
The Technical Outlook: Fastenal Bounces From Support
The price action in Fastenal has corrected from its post-pandemic peak and is now trying to establish a base of support. The price action bounced from the key support level of $45 already and may now find support at the higher $51 level. In this scenario, the stock should continue to build support as it approaches its next dividend declaration. If not, the price action could pull back to the bottom of the support range near $45 before bouncing strongly enough to move up and above the $53 level.