1. Tractor Supply Company (NASDAQ:TSCO)
5-Year Average Dividend Growth: 27.19%
Consecutive Years of Dividend Growth: 15
Tractor Supply Company (NASDAQ:TSCO) tops our list of the best dividend stocks for steady growth. The American farm supplies and home improvement company’s business model has shown resilience across various economic cycles, primarily due to its focus on CUE (consumable, usable, and edible) products. These essential items, such as livestock feed, bedding, weed control, and fertilizer, are regularly needed by consumers, ensuring consistent demand. The stock has surged by nearly 178% in the past five years, which shows that the company’s operations are likely to remain more stable than many other retailers during a recession.
In the second quarter of 2024, Tractor Supply Company (NASDAQ:TSCO) reported revenue of $4.2 billion, which showed a 1.48% growth from the same quarter last year. Gross profit also showed a 2.7% increase on a YoY basis at $1.56 billion. ClearBridge Investments has given a bullish outlook for the stock in its Q1 2024 investor letter. Here is what the firm wrote:
“In consumer sectors, we added Tractor Supply Company (NASDAQ:TSCO) and e.l.f. Beauty. Tractor Supply, in the consumer discretionary sector, is the largest rural lifestyle retailer in the U.S. We believe the company has meaningful scale and distribution advantages giving it a cost-to-serve edge, and notably generates 77% of sales from its 32 million loyalty members. Despite being the biggest retailer of its kind, Tractor Supply has only high single-digit market share of its large and growing addressable market, estimated to be approximately $180 billion. We see opportunities for Tractor Supply to resume its strong earnings trajectory as growth related to post-pandemic normalization nears a bottom. Operating margins have been flat for the past few years, but with investments peaking, margins should start to lever again with same store sales growth.”
As a dividend payer, Tractor Supply Company (NASDAQ:TSCO)’s cash position also remained strong in the most recent quarter. The company generated over $817.3 million in operating cash flow, growing from $782.3 million in the prior-year period. The company also returned $118.5 million to shareholders in dividends during the quarter. It has been growing its dividends for 15 consecutive years, with a five-year average annual dividend growth rate of over 27%. The company’s quarterly payout comes in at $1.10 per share for a dividend yield of 1.63%, as of August 23.
Of the 912 hedge funds tracked by Insider Monkey at the end of Q2 2024, 35 funds held stakes in Tractor Supply Company (NASDAQ:TSCO), up from 32 a quarter earlier. These stakes are worth $784 million in total. With over 1.5 million shares, Select Equity Group was the company’s leading stakeholder in Q2.
While we acknowledge the potential of TSCO as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued dividend stock that is more promising than TSCO but that trades at less than 7 times its earnings and yields nearly 10%, check out our report about the dirt cheap dividend stock.
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Disclosure: None. This article is originally published at Insider Monkey.
