Performance Check – Fastenal (FAST)

Time for Another Performance Check

For some background on the idea behind the Performance Check, and the XIRR function used for the calculations, please see my first post in this series.

A couple of months have passed since my last Performance Check (May 2019), but the series continues with a look at another dividend-paying stock from my Portfolio.  This time it’s Fastenal (FAST), a large-cap company in the Industrial sector, part of the Equipment Distribution industry.

FAST was founded in 1967 in Winona, Minnesota and the company is still headquartered there today.  The company operates in the U.S. and Canada, and internationally as well.  The company offers fasteners, and other industrial and construction supplies.  FAST has over 2,000 stores, but also distributes many of its products via vending machines.  According to the company’s website, “the original business plan was to dispense nuts and bolts via custom vending machines, but the technology proved impracticable at the time.  Several decades would pass before Fastenal finally popularized industrial vending.”  FAST proved its worth with outstanding customer service, too.  The company believes customer service is an integral element to powering growth.

As for the stock, FAST is a Dividend Contender, with over 20 years of consecutive dividend increases.  FAST has also already raised its dividend twice this year, providing a 10% raise in total compared to last year.

The dividend growth for FAST has been tremendous over the years.  In fact, their worst single-year raise in the past 20 years has been 6.67%.  Even better, the 3-yr., 5-yr. & 10-yr. dividend growth rates have been 11.20%, 14.00% and 19.47%, respectively.  However, their payout ratio (based on current year EPS of $1.41) is on the high side at over 62%.  Thus, dividend growth may be less compelling moving forward.

FAST is a relatively new Portfolio position (only a few years), and thus I don’t have a large amount of data/time to factor into the return calculated in this Performance Check.  Therefore, large price changes can have a significant impact on my annualized return.

 

My Personal Performance for FAST

My history with FAST in my Portfolio has been very straightforward.  I made my initial purchase in early 2015, then followed it up with a small add-on buy in late 2016.  Since then, the position has only grown organically (reinvested dividends and capital appreciation).  You can see this in the table below.

Below is a capture of the spreadsheet I keep with the FAST cash flows, and the calculated XIRR.  Compared to my five long-term Portfolio holdings, the table for FAST is small, thanks to its shorter holding period and minimal purchases relative to those other stocks.

Here’s a note with regard to the possible ‘Type’ column entries: EOY Value = End Of Year Value, Dividend = a dividend that was not reinvested (a cash outflow)

The duplicate EOY Value entries at the end of each year (one negative, one positive) do not affect the cash flow, and can be thought of as boundary markers, allowing me to make the individual yearly return, and the annualized total return calculations.

 

 

FAST went through a 2-for-1 stock split less than 2 months ago, which accounts for the large share increase and the price decrease in my 2019 numbers.

My returns with FAST were slow to develop after the initial 2015 purchase of 200 shares at $20.20 (split adjusted).  This led to my add-on purchase of another 70 shares at $19.19 (again, split adjusted) in late 2016.

FAST currently has an above-average weighting in my Portfolio at 2.44% – my 16th largest position.

The yield for FAST is currently 2.84% – above my Portfolio average of 2.65%.

All FAST dividend payments I’ve received since my position was started (on 4/7/2015) have been reinvested.

My current investment in FAST is $5,383.50.  My cost basis, which includes $751.95 in reinvested dividends, is $6,135.45.

Meanwhile, the current value is $9,288.84, which reflects a potential capital gain of nearly $3,153.39 should I liquidate my entire position.  The annualized total return ends up being 14.94%, covering my initial purchase on 4/7/2015, through 7/13/2019.

 

Summary

I’ve owned FAST for more than 4 years now and am thrilled to have recorded a nearly 15% annualized return.  My returns were muted the first year and a half after my initial investment.  However, my patience paid off with the price gains made in late 2016 and all of 2017.  Performance in the first half of 2019 has been strong as well!  I look for satisfying returns to continue for years to come.

Bringing the returns for my other Performance Check stocks (PG, RPM, AFL, PEP, JNJ, AL, GILD & TROW) up-to-date allows for the comparison below.

Note that rightmost column shows the year of my initial purchase for each stock, just to provide some detail with regard to how many years are part of the annualized return.

FAST debuts at #1 in terms of annualized return for my Portfolio stocks that I’ve reviewed.  Of course, with only 4 years of data thus far, a poor year could send it plummeting down the rankings.

Gilead Sciences (GILD) remains my poorest performer of the stocks reviewed thus far.  Its return has crept up over the past couple of months.  Yet, it’s clearly behind my other stocks.  Since my last Performance Check post, only one of my reviewed stocks has decreased its return, and that’s Johnson & Johnson (JNJ).  JNJ continues to deal with claims that use of its talc-based powders led to ovarian cancer and mesothelioma.

Returning to FAST, the stock has performed for me since my initial and follow-on purchases.  FAST dividend growth may have to slow down given existing earnings growth, but I still see the stock staying in my Portfolio.

 

Have you been checking on the performance of any of your portfolio stocks?  Or do you prefer to focus on their yield and dividend growth?