TSCO Is A Top Dividend And Buy Back Stock For Long-term Investment

Running scans for top dividend stocks, top buyback stocks, or top growth stocks, Tractor Supply Company TSCO shows up on all of them. 

The company operates more than 2,000 Tractor Supply stores and more than 180 Petsense stores across the U.S.

The stock has been a juggernaut for long-term investors. Here are some of the key metrics.

• Buyback yield: 2.5%
• Dividend yield: 1.9%
• 5-Year Average Dividend Growth Rate: 27.1%
• 5-Year EPS Average Growth Rate: 23.3%
• Expected EPS Growth Rate Next 5 Years: 9.2%
• 10-Year Average Yearly Return Vs. S&P 500 + 3.3%

Buyback and dividend yield add up to 4.4%. It's an excellent combination of some profits being given directly to shareholders, while another chunk of profits is used to buy back shares which reduces the number of shares outstanding and props up the share price.

The company boasts one of the highest dividend growth rates available, making it one of the top long-dividend dividend stocks as well. The dividend amount each year has increased an average of 27% per year.

Back in 2010, the dividend was $0.14 and the share price averaged about $15 that year. The dividend was a little less than 1%. If an investor bought and held, the current dividend of $1.50 is a growing 10% yearly return on that original investment, plus the stock has increased by a factor of more than 10 (trading over $210 currently). Buying now, assuming the dividend continues to increase, will result in the same phenomenon: yield on the original investment increases.

The stock has outpaced the S&P 500 by more than 3.3% per year and 14.2% per year, on average, over the last five years. Since 2007, TSCO is up 2,131% while the SPDR S&P 500 ETF SPY is up 324%. Chart courtesy of StockRover.com.

The long-term rally has been fueled by impressive earnings growth, which is expected to continue. Earnings increased an average of 23% per year over the last five years, and analysts expect 9% per year growth going forward. Future growth is higher than the median growth expected for all S&P 500 stocks (8.3%). Strive to own stocks that are better than average for outsized returns.

From a trade timing perspective, now is a decent time to buy. The stock is trading 12% off its 2023 all-time high having recently pulled back. The stock has a current P/E of 22.4 and a forward P/E of 18.8.

With steadily rising earnings for many years, the forward P/E estimate is fairly reliable. P/E values have ranged between 14.8 and 32.6 over the last half-decade, so the 18.8 forward P/E puts the stock in a great buy location, and the current P/E signals a decent/fair buy location (not really low, but not high either).

Disclaimer: The author doesn't currently hold a position, but may initiate one over the next several weeks or months based on what other opportunities are available.