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Instant Analysis: Fastenal Reports Q4 2015, Raises Its Dividend by 7%

By Eric Volkman - Jan 19, 2016 at 11:08AM

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The company posts declines for the quarter, and increases for the full year. The payout gets a bump to $0.30 per share.

What happened?
Industrial and construction materials supplier Fastenal (FAST 2.24%) simultaneously released its Q4 and full-year 2015 figures and declared an increase in its dividend.

For the quarter, the company posted net sales of just under $923 million, an incremental decline from the Q4 2014 figure. Net profit came in at $112 million ($0.39 per share), or 3% lower on a year-over-year basis. Both line items were slightly below analyst expectations of $923 million in revenue and EPS of $0.40.

The differences were more pronounced in the full year, with net sales rising 4% to $3.9 billion, and bottom line increasing 5% to $516 million ($1.77).

Fastenal declared a new quarterly dividend of $0.30 per share, an increase of 7% over the preceding amount. This will be dispensed on Feb. 26 to stockholders of record as of Jan. 29.

The new payout yields a robust 3.2% on the current share price, well exceeding the 2.3% average of stocks on the S&P 500 index. It also eclipses the yields of peer suppliers MSC Industrial Direct (MSM 1.77%) and W.W. Grainger.

Does it matter?
None of these developments were particularly striking. The lower quarterly figures were entirely expected, particularly given the struggles of the oil and gas industry, which forms a big part of Fastenal's customer base. MSC Industrial Direct, which is also highly exposed to that business, also saw revenue and profitability drop in its most recently reported quarter.

As for the dividend increase, that -- in conjunction with an ongoing share repurchase program -- seems to be more an attempt to support the stock than a strong mark of confidence in the business. In the press release detailing the results and heralding the distribution increase, Fastenal showed concern for the development of its share price -- which over the past year has declined by 16% -- and indicated it would continue to buy back stock, presumably to help it rise.

A good-size dividend should play into that strategy, so we can expect the new level to at least be maintained for some time. This should help keep income investors attracted to the stock, particularly when those yield comparisons are made to MSC Industrial Direct and W.W. Grainger.

Eric Volkman has no position in any stocks mentioned. The Motley Fool owns shares of and recommends MSC Industrial Direct. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Fastenal Company Stock Quote
Fastenal Company
FAST
$55.78 (2.24%) $1.22
MSC Industrial Direct Co., Inc. Stock Quote
MSC Industrial Direct Co., Inc.
MSM
$85.64 (1.77%) $1.49

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