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I’d buy this top-performing FTSE 100 dividend stock before the next bull market

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Ashtead Group (LSE: AHT) has jumped more than 8% today as the FTSE 100 dividend stock continues its impressive recovery following the stock market crash. It’s just posted a solid set of fourth-quarter results, and defied the Covid-19 pandemic to maintain its shareholder payout. This gives investors good cause for celebration.

But loyal investors have been celebrating for years. The Ashtead share price was the second-best FTSE 100 performer during the decade to December 2019, with a total return of more than 3,000%. I wrote then that it looked like a buy to me. Despite the pandemic, it looks like a buy today as well.

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Although Ashtead is listed on the FTSE 100, this dividend stock generates 90% of its earnings from the US, through its Sunbelt subsidiary. The group rents out general construction equipment, industrial tools, pumps, power generation, scaffolding, and restoration equipment. It’s benefited from the US boom, but punished by the Covid-19 bust.

Well-equipped for growth

The Ashtead share price fell more than 40% in March, but has since recovered almost all of its losses. The FTSE 100 dividend stock is renowned for steadily increasing payouts year after year. That run of growth now extends for 15 years, surviving both the financial crisis and the current pandemic.

Naturally, the lockdown hit demand for tool hiring. But today, management could still highlight a “resilient performance,” with full-year rental revenue up 8%, and operating profit up 0.9% to £1.2bn. Ashtead also posted record full-year free cash flow of £792m, more than doubling last year’s figure.

Chief executive Brendan Horgan is looking forward to a year of “strong cash generation and strengthening our market position.” This persuaded the board to maintain its progressive dividend policy and to recommend a final dividend of 33.5p. It also confirms Ashtead’s position as a top FTSE 100 dividend stock. Sensibly, it will pause acquisitions and share buy-backs for now.

I’d buy this FTSE 100 dividend stock

The Ashtead share price may get a further boost from reports that President Donald Trump is planning a $1trn US infrastructure plan, which will inevitably boost demand for its tools.

I’m so impressed Ashtead has been able to get through the crisis without making anyone redundant or using Government-backed job retention schemes, either in the UK or Canada. Q4 pre-tax profit inevitably plunged, by 52% to £98m, the first drop since 2011. Just imagine how impressive full-year profits might have been otherwise.

What Ashtead needs now is for the US economy to start flying again. That may happen as monetary and fiscal stimulus hits the market. So long as we don’t get a second wave of coronavirus.

This top FTSE 100 dividend stock has shown it has the strength to withstand a recession, and the muscle to power ahead in a bull run. Ashtead looks like a stock for all market conditions.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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