1 Magnificent Dividend Stock Down 40% to Buy and Hold Forever
Key Points
Tractor Supply has thousands of locations across the U.S. catering to farmers, gardeners, and others.
The retailer -- known for its rural-lifestyle products -- is not growing briskly, but it's growing.
Its stock looks undervalued, and its recent forward-looking P/E ratio is well below its five-year average.
- 10 stocks we like better than Tractor Supply ›
If you're not seeking dividend-paying stocks for your portfolio, you should consider doing so. Here's why:
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Average Annual Total Return, 1973-2025 |
|---|---|
|
Dividend growers and initiators |
10.22% |
|
Dividend payers |
9.20% |
|
No change in dividend policy |
6.87% |
|
Dividend non-payers |
4.21% |
|
Dividend shrinkers and eliminators |
(0.96%) |
|
Equal-weighted S&P 500 index |
7.74% |
Data source: Ned Davis Research and Hartford Funds.
See? Unbeknownst to many investors, dividend-paying stocks can be great wealth builders in your long-term portfolio. And here's one you might want to take a look at: Tractor Supply (NASDAQ: TSCO). The stock recently sported a dividend yield of 3% -- and, when you factor in the value of share buybacks, the total yield for shareholders was recently a hefty 5.2%. Better still, the company has been hiking its payout for 17 years in a row.
Image source: Getty Images.
Meet Tractor Supply
Founded way back in 1938, Tractor Supply is focused on serving recreational farmers, ranchers, homeowners, gardeners, and pet owners, among others. It's the largest rural lifestyle retailer in the U.S., with 2,435 Tractor Supply stores in 49 states. It also encompasses more than 200 Petsense by Tractor Supply stores in 23 states, as well as Allivet, an online animal pharmacy.
Should you invest in Tractor Supply?
The stock was a bit of a market darling for many years, but it has struggled lately. Its recently reported first quarter featured overall revenue up just 3.6% year over year, with earnings per share dipping 9%. Part of the problem has been weakness in its "companion animal product" category -- which includes pet foods and generates around a quarter of the company's overall revenue. The company is addressing its issues, in part by beefing up its fresh and frozen pet food offerings.
CEO Hal Lawton summarized the quarter:
We delivered solid performance across the majority of our business in the first quarter, supported by our needs-based model and ongoing customer engagement. We continued to gain market share in farm and ranch and had strong double-digit growth in digital sales. Performance was positive across four of our five product categories. While companion animal trailed the Company average, we are taking decisive actions to improve its performance. ... We remain confident in our outlook and our ability to drive continued market share gains as our customers remain engaged. The underlying health of Tractor Supply remains strong, supported by a loyal customer base, a differentiated business model and consistent execution.
Some research supports that view. For example, a 2026 report from Axiom Marketing found that gardening time and spending hit multi-year highs in 2025, with expectations for higher numbers in 2026.
It's true that Tractor Supply isn't performing as well as it might right now, but it's a sturdy and growing business with devoted customers, and plans to grow its revenue and earnings faster. (It's projecting revenue growth of 4% to 6% for 2026, for example.) The stock's recent forward-looking price-to-earnings (P/E) ratio of 15 is well below its five-year average of 22, suggesting that it's undervalued -- which is not surprising, given its drop of roughly 40% over the past three months.
Tractor Supply's solid dividend will reward patient believers while they wait for rosier results.
Should you buy stock in Tractor Supply right now?
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Selena Maranjian has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tractor Supply. The Motley Fool has a disclosure policy.
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