Tractor Supply Offers Investors Resilience
The Federal Reserve’s recent rate hikes have raised concerns about potentially weaker consumer spending or slower growth rates. In this environment, Tractor Supply stock stands out as a reasonably priced and resilient investment.
Over half of Tractor Supply’s sales come from demand-driven, needs-based products such as livestock feed, pet food, lubricants, fertilizers, weed control, and bird seed. The company focuses on providing essential and consumable products that are regularly used for lifestyle and maintenance purposes.
Compared to other retail sectors, Tractor Supply’s sales are less susceptible to sharp declines during a recession. This is due to the nature of its offerings, which cater to the demand for essential products.
Is Tractor Supply Stock a Buy?
With a price-to-earnings ratio of just 22, Tractor Supply stock is attractively valued and appears to be a good buy at the current level. While the S&P 500 gained 24% last year, the company’s stock experienced a 4% decline primarily driven by declining comparable store sales.
However, as consumer spending patterns return to normal and the company faces easier year-over-year comparisons, Tractor Supply’s same-store sales trends are expected to improve.
Investors can also take comfort in the fact that Tractor Supply offers a solid dividend, which has experienced significant growth in recent years. With a current quarterly dividend of $1.03 and a dividend yield of 1.8%, the company’s payout ratio is just 39%. Analysts forecast a compound average annualized growth rate of 5.4% for Tractor Supply’s earnings over the next five years, indicating the potential for further dividend growth.
For less risk-tolerant investors, it may be advisable to wait for more information about the company’s performance in the final quarter of 2023 before considering an investment in Tractor Supply stock.