Fastenal's Dividend Machine: A Steady Hand in a Shaky Market

In a world where volatility reigns, investors crave stability. Fastenal (FAST) has quietly built a reputation as a dividend stalwart, increasing payouts for 13 consecutive years and weathering every economic storm thrown its way. But here's the twist: the company's recent $0.22/share quarterly dividend, paired with a two-for-one stock split and a puzzling pause in buybacks, raises critical questions about where to place your bets. Let's dive in.

The Dividend Growth Engine: A 13-Year Streak

Since 2011, Fastenal has turned into a dividend powerhouse. Let's look at the numbers:

The company's dividend has grown at an 11.6% CAGR over the past three years, outpacing the broader market. The recent $0.22/share dividend, announced on July 11, 2025, marks another step in this march. But here's the kicker: this dividend comes after a two-for-one stock split in May 2025. While the split cut the per-share amount numerically, it kept the total payout intact, making shares more accessible to everyday investors.

The Split's Secret Weapon: Accessibility Meets Value

The split isn't just about cheaper shares—it's a masterstroke of shareholder-friendly strategy. Before the split, Fastenal's stock hovered around $80/share, pricing out many retail investors. Post-split, the price dropped to ~$40/share, broadening its investor base. And with a current yield of 2.03%, it's now a compelling income play.

But wait—the split also diluted the “special dividend” allure. Fastenal has a history of surprise lump-sum payouts (like the $0.38/share in Q4 2023), but 2025 has seen no such move yet. Is this a red flag? Not necessarily.

The Buyback Black Hole: Why Fastenal Is Saying “No”

Fastenal holds an unused $12.4 million buyback authorization from 2022. Yet, in Q2 2025, the company chose not to repurchase a single share. This inaction sparks two questions:
1. Why not deploy cash to lift the stock?
2. Is the board signaling caution?

The answer lies in the company's playbook. Fastenal prioritizes financial flexibility over aggressive buybacks. With a dividend cover ratio of 2.0 (meaning earnings comfortably exceed payouts), the board can afford to sit on cash without sweating liquidity. In a world where recessions loom, this prudence isn't a flaw—it's a virtue.

The Opportunity Cost: Dividends vs. Buybacks

Here's the trade-off: If Fastenal used its buyback capacity, it could potentially boost share prices. But consider this:
- The company's cash flow from operations remains robust, averaging $1.3 billion annually over the past three years.
- The stock's 52-week high is $44.00, just 2% above its July 11 closing price of $43.27.

Investors: Would you rather bet on a potential buyback-driven pop or a surefire 2% yield? In my book, the dividend is the safer bet.

The Investing Case: Income Over Growth

Fastenal isn't a high-growth wonder—it's a reliable machine. With a dividend yield now above 2%, and a track record of hikes through thick and thin, this stock is a “set it and forget it” income pick.

Action to Take:
1. Buy the dip. If the stock slips toward its 52-week low of $32.04, scoop it up.
2. Ignore the buyback noise. The board's caution isn't a sin—it's a sign they're not overreaching.
3. Focus on the dividend. A 2.03% yield in a 3.5% bond world? That's a win.

Final Word: A Dividend Darling in Disguise

Fastenal isn't flashy, but it's flawless. With a fortress balance sheet, a split that widens its investor base, and a dividend that's grown through every recession since 2008, this is a stock for investors who value consistency over flash.

In a market where uncertainty rules, Fastenal's dividend is your sure bet. Don't let the paused buybacks scare you—this is a company that knows how to keep the lights on, and shareholders' pockets padded.

Final Verdict: Buy FAST for income, not growth. The dividend is here to stay.