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.
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.
With global markets in turmoil as the coronavirus pandemic tightens its grip, turning to shares to generate income isn’t as simple as it used to be…
As the realities of ‘life under lockdown’ begin to bite, many of the stock market’s ‘go-to’ high-yielding companies have either taken an axe to their dividend pay-outs… or worse, opted to suspended them altogether – for the near-term at least.
With so many blue-chip and mid-cap companies scrambling to hoard cash right now, where are we income investors to turn for decent yields?
Fortunately, The Motley Fool is here to help…
Our analyst has unearthed what he believes could be a very attractive option for income- seeking investors – a company that, in his view, boasts a ‘reliably defensive’ business model, combined with a current forecast dividend yield of 4.2% to boot!*
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This business even has form in riding out this kind of situation, too… having previously increased sales and profits back in 2008 and 2009 when the world was gripped in the deepest economic crisis since the Great Depression.
*Please be aware that dividends are variable and not guaranteed.
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.