A Once-in-a-Decade Opportunity: 1 Magnificent S&P 500 Dividend Stock Down 45% to Buy Right Now

It isn't an everyday occurrence to see an S&P 500 dividend growth stock trading near a 52-week low while its president and CEO is actively buying shares. But that is exactly the case with leading rural lifestyle retailer Tractor Supply Company (NASDAQ: TSCO).

As a Steady Eddie, S&P 500 stock with a 15-year streak of raising its dividend, Tractor Supply was already on my radar. However, after seeing that its president and CEO, Hal Lawton, was buying $500,000 worth of the company's shares, I thought it was a good time to revisit the stock while it trades near a once-in-a-decade valuation.

A CEO buy signal?

While it can be a mistake to read too much into an insider transaction, the recent buying from Tractor Supply's top banana stands out -- especially since the purchases appear to be made with their own personal money. As famed investor Peter Lynch once explained, "Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise."

Image source: Getty Images.

I don't want to assign too much value to Lawton's purchase, but it is a nice sign to see, or at least a helpful tiebreaker for which stock to pick next from my shortlist. Though a $500,000 purchase isn't massive, at least compared to the global stock market's scale -- easy for me to say, having never made a purchase of that size, of course -- the timing of the purchase is interesting nonetheless.

Furthermore, numerous studies have shown that buying alongside insiders has historically been an outperforming proposition, including one study from Leslie A. Jeng, Andrew Metrick, and Richard Zeckhauser, which showed six percentage points of outperformance annually over time.

Why buy Tractor Supply...

The main reason Tractor Supply is on my shortlist of stocks to buy is that it has more than 41 million members who generate more than 80% of the company's total sales. This incredibly loyal customer base is a large reason that TSCO stock has been a 150-bagger since 1994.

TSCO Total Return Level data by YCharts

However, the company has run into a buzzsaw of headwinds over the last year, including:

• Shrinking ticket sizes (big-ticket item pullback)
• A more cautious consumer in general
• Ever-changing tariff shifts
• Post-pandemic normalization, after many big-ticket purchases made in 2020 and 2021 have not yet needed to be repeated

Whether customers bought the new mower they wanted during COVID-19, are balking at the costs of bigger items due to tariffs, or simply being more cautious in an inflationary environment, Tractor Supply's same-store sales finally turned negative in the last quarter.

That said, the company generates most of its sales from consumable, usable, and edible goods like livestock feed, farm essentials, and pet supplies, so there is a large base of intact sales that is likely never-ending, provided Tractor Supply takes care of its core customers. As the company continues to inch its store count higher (to roughly 3,200 by 2030 from 2,600 today), sales growth should be fine over the longer term. Similarly, after its May acquisition of VIP Petcare -- a mobile veterinary care clinic with 2,700 retail locations -- further sales growth should be unlocked.

...and why now?

Whether you prefer to look at earnings before interest, taxes, depreciation, and amortization (EBITDA), or just plain net income, Tractor Supply is valued about as cheaply as it has been over the last decade.

TSCO P/E and EV/EBITDA Ratios data by YCharts

This isn't quite deep-value territory just yet, but it is a pretty great discount for a company with Tractor Supply's track record.

Furthermore, the company's 2.7% dividend yield is well above its 10-year average of 1.5%. Despite raising its dividend payments for 15 straight years, Tractor Supply currently only uses 49% of its net income to fund its payouts, leaving ample room for growth further down the road.

The cherry on top for investors?

Management has reduced the company's shares outstanding by 2.4% annually over the last decade, eliminating one-fifth of its shares along the way and generating even more value for investors.

Thanks to the company's niche-leading operations, loyal members, and once-in-a-decade valuation, I'm pretty confident I'll be buying along with Tractor Supply's president and CEO soon.

Josh Kohn-Lindquist has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tractor Supply. The Motley Fool recommends the following options: short October 2026 $35 calls on Tractor Supply. The Motley Fool has a disclosure policy.