1 Top Dividend Stock With a Long Growth Runway

Key Points

• Management's long-term algorithm calls for steady comps, expanding margins, and double-digit earnings per share growth.

• Second-quarter results and full-year guidance line up with those goals.

• Dividend growth remains supported by a conservative payout and healthy cash generation.

• 10 stocks we like better than Tractor Supply ›

Tractor Supply (NASDAQ: TSCO), the country's largest rural-lifestyle retailer, used its December 2024 Investment Community Day to spell out "Life Out Here 2030," a simple, measurable plan for the next stretch of growth. The roadmap leans on loyalty, private and exclusive brands, last-mile delivery, pet and animal Rx, and a new retail media network -- all while stepping up store growth and raising the long-term store opportunity to 3,200.

Importantly, 2025 is tracking to the script. In the second quarter of 2025, net sales rose 4.5% with 1.5% comparable sales growth. Gross margin ticked up to 36.9%, and management reaffirmed full-year guidance for 4% to 8% net-sales growth, 0% to 4% comps, and a 9.5% to 9.9% operating margin.

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"We remain confident in our outlook," CEO Hal Lawton said, citing market-share gains and a flexible, U.S.-skewed supply chain.

While the company's quarterly results are important, they're best viewed in the context of the company's long-term targets laid out at its Investment Community Day. Here are five key points from the presentation late last year that every Tractor Supply investor should know.

Image source: Getty Images.

1. Strong, steady comparable sales

Management's long-term target for comps is 3% to 5%. For a retailer with a high mix of recurring "consumable, usable, edible" categories, that cadence should keep traffic and ticket moving without straining the model. After the delayed spring weighed on seasonal categories early in the year, second-quarter comps returned to growth at 1.5%, a helpful mile marker toward the 3% to 5% goal as seasonal compares ease and loyalty engagement deepens.

2. Store count growth

The long-term net sales algorithm calls for 6% to 8% growth, implying a healthy contribution from new stores layered on top of comparable store sales (comps). Tractor Supply now pegs its total store opportunity at 3,200 (up from about 2,300 today) and plans to open about 90 locations in 2025, with an addressable market of roughly $225 billion supporting that build-out. The combination of local assortment, direct sales to its "Out Here" business customers, and improved last-mile delivery should help newer stores mature more quickly.

3. A 10% to 10.5% operating margin

Additionally, the company expects to achieve a double-digit operating margin. The target band reflects growing penetration of private/exclusive brands, a retail media profit stream, and ongoing cost discipline. Second-quarter gross margin improved to 36.9% even with uneven weather, and full-year guidance implies operating margin moving toward the high-9% range as 2025 progresses -- a bridge to the 10% to 10.5% longer-term zone.

4. Earnings per share growth of 8% to 11%

Earnings per share should compound faster than sales as margins firm and share count trends lower. Management's Investment Community Day algorithm targets 8% to 11% earnings per share growth over time. For 2025 specifically, Tractor Supply reaffirmed diluted earnings per share guidance of $2.00 to $2.18. That near-term range sits below the long-term cadence -- reasonable, given a soft consumer in some discretionary categories. But the building blocks are in place as seasonal compares normalize, initiatives scale, and buybacks continue.

5. Capex discipline

The company plans to keep capital expenditures at about 4% of net sales, funding remodels, garden centers, last-mile capabilities, and distribution while preserving free cash flow. That balance supports Tractor Supply's capital returns: the quarterly dividend is currently $0.23 per share (about $0.92 annualized) and the company still expects several hundred million dollars of repurchases this year. At that dividend rate and 2025 earnings per share outlook, the payout ratio -- the share of earnings paid out as dividends -- sits at about 44%, leaving room to raise the dividend alongside earnings.

Stepping back, Tractor Supply's biggest risk is arguably the macro environment. A softer consumer, for example, can pinch big-ticket categories for stretches of time, weighing on sales. That said, a loyal member base, a high mix of everyday "C.U.E." categories (consumable, usable, and edible products), and a largely U.S.-sourced assortment give Tractor Supply tools to manage through those bumps.

Altogether, the five targets outline a clear path for dividend growth and steady cash returns. If execution tracks toward the midpoint of Tractor Supply's 2025 guidance, the case for a long runway in both earnings and the dividend looks intact. For investors seeking a balanced mix of income and growth, Tractor Supply's plan makes the stock worth a close look.

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Daniel Sparks and his clients have 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 2025 $60 calls on Tractor Supply. The Motley Fool has a disclosure policy.