As frequent readers are aware, we at Simply Wall St. adore dividends, so the news that Tractor Supply Company (NASDAQ:TSCO) will be trading ex-dividend in the next four days is fantastic. The record date, which is the day on which a firm decides which shareholders are entitled to receive a dividend, is usually one business day prior to the ex-dividend date. It is crucial to be aware of the ex-dividend date since any stock purchases done on or after this day may result in a delayed settlement that is not shown on the record date. Thus, in order to get the dividend, which Tractor Supply will pay on December 12th, you must acquire shares of the firm before November 24th.
Following a dividend payment of US$4.12 to shareholders last year, the company’s next payout to shareholders will be US$1.03 per share. Tractor Supply has a trailing yield of 2.0% on the current share price of $202.61, as determined by computing the last year’s worth of payments. For many owners, dividends represent a significant source of income; yet, the company’s ability to continue paying dividends depends on its overall health. Therefore, we must look at Tractor Supply’s financial stability and potential for dividend growth.
Since dividends are often deducted from corporate income, a company’s dividend is typically more likely to be lowered if it gives out more than it made. Thankfully, Tractor Supply has a payout ratio of only 39% of earnings, which is rather low. However, when evaluating dividend sustainability, cash flow usually takes precedence over profit, so we should always make sure the firm made enough money to pay its dividend. It distributed 54% of its free cash flow as dividends during the last year, which is within the typical range for most businesses.
Since it is simpler to raise the dividend when profits are growing, stocks of firms that create consistent earnings growth frequently provide the highest dividend prospects. A business slump that results in a dividend decrease might cause the company’s value to drop sharply. The fact that Tractor Supply’s earnings have increased by 26% annually over the last five years is positive.
The majority of investors see the past rate of dividend increase as their primary indicator of a company’s dividend prospects. In the ten years since our data began, Tractor Supply has increased its dividend by an average of almost 26% annually. It’s fantastic to see dividends per share increasing in tandem with the significant growth in earnings per share over the past few years.
Is Tractor Supply a good investment given its impending dividend? In the last year, Tractor Supply has paid out less than half of its earnings and slightly more than half of its free cash flow. The company’s earnings per share has increased at a decent rate. Tractor Supply has several positive aspects, thus we strongly advise looking at it more.
Even if the dividends on Tractor Supply alone can make you want to invest, you need always be aware of the hazards. Every business has some risk, and here is one that you should be aware of about Tractor Supply.