Tool time!

Every stock on today’s list operates in the construction, maintenance, or hardware industry.

Why buy companies in this sector?

Well, the market is hitting new all-time highs and several tool and building materials stocks seem to offer good value.

In today’s special report, we’ve got: a market-beating nuts and bolts business, an inflation-busting tool maker, and a virtually unknown micro cap that raised its dividend by 53.8% last year.

Let’s go lowest starting yield first, and work our way down to the highest paying investment…

1. Fastenal Company ($FAST)

Fastenal Company manufactures and distributes fasteners - the construction industry term for nuts, bolts, and screws. It’s about as boring a business as you can get. But what’s not boring are Fastenal’s long-term returns and inflation-beating dividend growth rate.

This is a business that’s delivered a 10-year average annual total return of 17.97%.

And, Fastenal Company has a 5-year compound annual dividend growth rate of 11.91%.

This business was founded in 1967. And, Fastenal has consistently paid dividends every year since 1991. The biggest downside to this company is that it is expensive. Fastenal trades at a price to earnings ratio of 38.47, giving it tech stock levels of valuation. However, Fastenal has maintained a reasonably high starting yield of 2.10%. Additionally, I’m okay buying an expensive stock if it’s a quality business. I bought Visa Inc. when everyone said it was “incredibly overvalued” back in 2023. And Visa is up +55% since then.

To recap, Fastenal Company is an expensive stock. But also one that beats the market, pays a 2.10% starting dividend, and grows its dividend at a rate that outpaces inflation.

2. Snap-on Incorporated ($SNA)

Snap-on Incorporated makes ratchets, drills, vehicle diagnostics equipment, and storage containers. These products are used by a wide range of customers, including: homeowners and “do it yourself” types, professional mechanics and builders, and the United States military.

This is a well established business that dates back to 1920. And, Snap-on has consistently paid dividends every year since 1938.

Over the past decade, Snap-on’s returns have lagged the S&P 500. However, the company’s dividend growth is phenomenal, with a 5-year compound annual growth rate of 14.59%.

On top of this, Snap-on maintains a low payout ratio of 28.85%, leaving plenty of room for future dividend growth.

According to the “Rule of 72,” Snap-on investors will double their yield on cost in just 4.93 years - if the company continues to raise its dividend by an average of 14.59% per year. In other words, this is a stock that could be rewarding investors with a 5.5% yield on cost if it continues its dividend growth trajectory.

At its current price to earnings ratio of 16.70, Snap-on is a relatively inexpensive stock considering its decently high starting yield and rapid dividend growth.

3. George Risk Industries, Inc. ($RSKIA)

Speaking of cheap stocks with high starting yields and inflation-beating dividend growth, here’s a company yielding 6.25% that trades at a single digit valuation and raised its dividend by 53.8% last year!

George Risk Industries, Inc. is a little-known micro cap, over-the-counter stock.

The company makes security products, sensors, cables, and specialty switches. George Risk Industries was founded by George Risk, an inventor and electronics enthusiast who founded numerous tech companies in the 1930’s, 40’s, and 50’s.

I like George Risk Industries for several reasons…

The company has a debt-free balance sheet, always good news. George Risk Industries is a multi-generational family-run business, a good indicator that management thinks long-term. And, the firm pays a 6.25% starting dividend while also achieving an impressive 5-year compound annual dividend growth rate of 20.85%.

Also, despite being a virtually unknown micro cap stock, George Risk Industries has delivered a pretty solid 10-year average annual total return of 11.66%.

Conclusion

Three stocks, all tool and hardware themed. But each with its own unique characteristics.

One beats the market. One beats inflation while being reasonably valued. And one really beats inflation while carrying no debt and trading at a dirt-cheap price to earnings ratio.

As always, thank you for reading and happy investing!

Disclaimer: This article is for entertainment purposes only. It is not financial advice, always do your own research.