Fastenal to Pay Special Dividend

Recently, the board of directors of Fastenal Company ( FAST - Analyst Report ) declared a special one- time cash dividend of 50 cents per share on the company's common stock. The dividend is payable on December 21, 2012 to stockholders of record as of December 7, 2012.

Previously, the industrial and construction product supplier had declared its fourth quarterly cash dividend of 21 cents per share on the company's common stock on October 10, 2012. The dividend is payable today, i.e. November 26, 2012 to stockholders of record as of October 29, 2012.

A peer of Home Depot Inc., ( HD - Analyst Report ) , Fastenal had earlier increased its dividend payout for fiscal 2012. The company paid a dividend of 74 cents per share for fiscal 2012 compared with 65 cents for fiscal 2011. The increased dividend can be attributed to the company’s strong liquidity position throughout 2011 and 2012. As of September 30, 2012, Fastenal had cash and cash equivalents of $195.6 million, higher than $185.9 million as of June 30, 2012.

After prolonged decline in daily sales growth in the first half of fiscal 2012, Fastenal benefited from increase in manufacturing customers and non residential construction customers, driven by improvement in the construction market. As a result, daily sales grew 6.8% in the month of October 2012, which is an encouraging sign.

Moreover, Fastenal is accelerating its vending contract signings and installations. We are also encouraged by Fastenal’s numerous growth drivers like government business and metalworking, which are gaining traction and will help to achieve future profitability. Other than that, the company’s strategy of new store openings positions it well for future growth.

We currently have a ‘Neutral’ recommendation on Fastenal over the long term. The stock carries a Zacks #3 Rank that translates into a short-term ‘Hold’ rating.