Fastenal Company

(NASDAQ Global Select)
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Neutral +5

Fastenal vs. Applied Industrial Technologies: Which Dividend Grower Is the Better Buy?

Dividend AI-generated analysis

πŸ“Š Applied Industrial Technologies is recommended over Fastenal for long-term dividend growth investors due to its strong balance sheet and lower valuation multiple.

🏭 Fastenal operates a vast network of 3,200 locations and 140,789 vending installations, securing 75.8% of revenue from contract customers.

πŸ’° Fastenal's dividend payout ratio reached 79.8% of net income in 2025, leaving little cushion for growth or economic downturns.

πŸ“ˆ Applied Industrial Technologies achieved over 20% organic sales growth in automation and expanded into 27 of the top 30 U.S. service center sectors.

πŸ’Έ Fastenal's gross margin contracted by 50 basis points to 44.6% in the first quarter as larger accounts grew in its revenue mix.

πŸ“‰ Applied Industrial Technologies trades at a forward P/E of 28x with a PEG ratio of 2.779, offering significant upside to analyst price targets.

πŸš€ CEO Neil Schrimsher guides Applied toward $11.65 to $12.15 EPS for fiscal 2027 and raised intermediate sales targets to $7 billion.

πŸ›‘οΈ Applied Industrial Technologies maintains a net leverage of just 0.2 times EBITDA while executing more than 18 acquisitions since 2018.

Bullish Signals
  • Fastenal has successfully expanded its embedded vending network to over 140,789 installations, creating high switching costs that competitors cannot easily match.
  • The company achieved a 14.7% revenue increase in the second quarter, reaching $2.39 billion driven by its digital footprint and contract customer base.
Risk Factors
  • Fastenal's dividend payout ratio consumed nearly 80% of net income in 2025, indicating a lack of financial cushion for future growth or economic stress.
  • Gross margins contracted by 50 basis points to 44.6% in the first quarter as the mix shifted toward larger accounts with lower profitability.
  • The company faces elevated capital expenditure guidance of $310M to $330M for 2026, up from $230.6M, which may pressure free cash flow generation.
Full Analysis
This article compares Fastenal (FAST) and Applied Industrial Technologies (AIT) as dividend growth investments, concluding that AIT is the superior choice for long-term investors seeking capital appreciation and sustainable payout growth. While Fastenal offers a higher starting yield of 1.81% compared to AIT's 0.58%, it carries significant financial stress with dividends consuming nearly 80% of its net income in 2025. Fastenal has executed a strategy focused on embedded vending networks, boasting over 3,200 locations and 140,789 installations that create high switching costs. However, the company faces margin pressure with gross margins contracting to 44.6% in the first quarter as larger accounts dilute profitability. The payout ratio remains thin against rising capital expenditure guidance of $310M to $330M for 2026. In contrast, Applied Industrial Technologies maintains a cleaner financial profile with a debt-free balance sheet and a history of consistent dividend increases without supplemental distributions. CEO Neil Schrimsher guides the company toward $7 billion in intermediate sales and 18% five-year EPS growth, supported by strong organic automation sales growth exceeding 20%. AIT trades at a lower multiple of 28x forward earnings compared to Fastenal's 37x.