Tractor Supply (TSCO +0.38%) has been on my radar for years as one of the best-run retailers serving rural and hobby-farming customers. Today, the stock offers a solid dividend yield, even as the company invests aggressively in its growth ambitions.
Even more, Tractor Supply is the clear leader in its niche. The rural lifestyle retailer has spent the past decade building a nationwide footprint with a unique store format and strategic locations that make it difficult for big-box rivals to copy it. Additionally, it has a fast-growing and valuable loyalty program. These factors combine to make Tractor Supply one of the most resilient retailers with strong growth prospects.
For 2026, Tractor Supply is my top dividend stock idea because the current yield looks attractive, and the payout is conservative relative to earnings. On top of that, the underlying business is starting to accelerate again, and management is leaning into a clear plan that calls for performance to accelerate toward the ambitious targets shared at its late 2024 Investment Community Day.
Here are five reasons this stock tops my list of dividend stock ideas for 2026.
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1. An attractive dividend yield
Tractor Supply's dividend yield sits at about 1.7%. Not only is this well above the S&P 500's (^GSPC +0.98%) dividend yield of 1.2%, but a combination of this decent dividend yield plus consistent dividend expansion makes it more attractive than it may look at first glance.
The company has raised its dividend for 16 consecutive years. Additionally, over the past five years, the dividend has more than doubled (when adjusting for the impact of stock splits).
2. Room to raise the payout
Another part of the story is the payout ratio. Tractor Supply's dividend consumes a little under half of Tractor Supply's earnings (the payout ratio is 44%). That leaves meaningful room for continued growth even if earnings growth stalls (though I believe this is unlikely, at least in the near term).
3. Growth is reaccelerating
Tractor Supply's third-quarter revenue rose 7.2% year over year. This marked an acceleration from 3.4% growth in the first half of the year and 2.2% growth for the full year of 2024.
Comparable-store sales growth trends, which help highlight improving sales trends and established stores, are also improving. Comparable-store sales growth came in at 3.9% for Q3 -- well above the anemic 0.2% growth it posted for the full year of 2024.
4. Normalizing consumer spending trends
2025 has been a year in which the company is swinging back to more normalized sales trends after getting whip-lashed by an unprecedented surge in demand during COVID-19 years as consumers shifted spending away from services to goods, essentially creating a pull forward in demand and ultimately leading to unimpressive growth in the years that followed this period. But spending patterns are finally settling into more typical ranges after several unusual cycles tied to the pandemic and its aftermath.
If comparable-store sales also continue to improve from the very low levels posted in 2023 and 2024, earnings growth should begin to resemble the longer-term algorithm that supports the dividend story.
NASDAQ: TSCO
Key Data Points
5. Bold long-term targets
At its late-2024 Investment Community Day, Tractor Supply essentially told investors that it expects to return to more normalized growth levels of its past -- and those levels are impressive.
The company said it expects annualized sales growth through 2030 to average a rate of about 6% to 8% per year. Other 2030 targets management shared included a forecast for average annualized comparable-sales growth of 3% to 5% and average annualized earnings-per-share growth of 8% to 11%. The plan also includes steady share repurchases that reduce the share count over time.
So should you buy Tractor Supply?
Overall, I believe these five factors make the stock a buy -- especially considering the stock's conservative valuation of less than 26 times earnings, as of this writing. That is a noticeable discount compared with other premium retailers such as Costco and Walmart, which trade at price-to-earnings ratios of 49 and 37, respectively. Sure, it isn't a bargain valuation, but if Tractor Supply can hit its long-term financial targets (and I think there's a good probability it will), then 26 times earnings seems like a fair price to pay.
