Shares of Tractor Supply Company (NASDAQ: TSCO) have steadily plowed new highs over the last few years, and it is on track to harvest another. The Life Out Here strategy by CEO Hal Lawton produced a bumper crop of growth the company will ride to new highs over the coming years. That might be why the company extended his contract for another 3 years.
The takeaway for investors is that this hum-drum-sounding name is a blue-chip operator and sleep-soundly-at-night stock paying a healthy dividend and competing successfully with Walmart, Target, Home Depot, Lowe’s and every other store focused on population centers. There aren’t many city centers out in the country, but many people enjoy life out there, and Tractor Supply is there to help.
The Analysts Are Driving Tractor Supply Co. Higher
The analysts are driving Tractor Supply Co. stock higher and have issued a steady string of upgrades and price target increases over the past year. The caveat is that an equal number of downgrades have kept the consensus sentiment pegged at Moderate Buy while the price target trended higher. The latest comes from Wells Fargo, which has an Overweight rating on the stock. Analysts at the firm raised the price target to $270 from $255, above the consensus target and 15% above the current price action. This year the high price target of $273 was also set, and most of the 2023 targets are above consensus.
The analysts expect growth in Q1 but may be underestimating the strength given the surge in Q4. The $1.72 in consensus revenue is up 9.6% from last year but down from the prior quarter, and growth slows from 20%. A 20% growth rate is unlikely in Q1, given the season, but strength should not be ruled out.
Tractor Supply Co. is also aggressively growing its dividend. The payout is worth about 1.77% to investors and is helping to support the stock price because of growth. The payout ratio is a low 38% that, coupled with the high-single-digit EPS growth rate, produces a lever for distribution growth. That is evidenced by the 28% CAGR the company has run for the last 5 years. The CAGR may slow in the coming years, but growth is expected to continue.
Tractor Supply has the hallmarks of a Dividend Aristocrat and only needs to do what it has been doing for another 12 years. That may sound like a long time but how long until retirement? Compounding dividend distributions will drive cash flow and capital gains for any portfolio.
Institutional Support For Tractor Supply Co. Is High
The institutions sold on balance in Q1, but that is not surprising. The stock tickled an all-time high presenting an attractive time to take profits. The takeaway is that buying almost offset the selling, and they have been buyers on balance for the last year. Their holdings are up to 84% and growing based on the trend. Assuming the Q1 results are satisfactory, the institutions may resume buying in Q2.
The chart is promising because the price action has risen to an all-time high, and it looks like it wants to move higher. The catalyst could be earnings released on April 27th. If the market moves to a new high, momentum could take it up to the $270 region Wells Fargo has predicted.
