Tractor Supply Co (TSCO), a classic stalwart in the S&P 500, has raised its dividend for 15 consecutive years and has long been on my watchlist. After noticing that the company's President and CEO, Hal Lawton, spent $500,000 buying shares, I believe it's the right time to revisit this stock: its current valuation is a once-in-a-decade opportunity.
While it's not advisable to over-interpret market moves based solely on insider trading, this TSCO executive's purchase is particularly noteworthy, especially since it was funded by his own personal money. Renowned investor Peter Lynch famously noted: "Insiders sell stocks for many reasons, but they buy for only one reason鈥攖hey think the price will rise." I won't overstate the significance of Lawton's purchase, but it is undoubtedly a positive signal, at least helping me prioritize it in my watchlist for action.
The $500,000 amount is not massive on a global stock market scale鈥攐f course, I've never made a purchase of that size, so I might be speaking from a comfortable position鈥攂ut the timing of the purchase is highly informative. Multiple academic studies confirm that following insider stock purchases can generate excess returns over the long term. Research by Leslie Jeng, Andrew Metrick, and Richard Zeckhauser shows that such strategies can yield annualized excess returns of up to 6 percentage points.
Why Tractor Supply Co stands out
The core logic behind adding TSCO to my buy list: the company boasts over 4.1 million members, who contribute more than 80% of total sales. This highly loyal customer base is also a key reason the stock has surged 150 times since 1994. However, over the past year, the company has faced a series of headwinds: declining average transaction values, weakening demand for big-ticket items, cautious consumer spending overall, continuous tariff policy changes disrupting the market, and a post-pandemic normalization: the concentrated demand for large durable goods released in 2020-2021 has temporarily subsided, with no immediate need for repeat purchases. Whether it's consumers having already purchased lawnmowers and other equipment during the pandemic, tariffs raising the cost of large items, or inflation prompting people to cut spending, a combination of factors has led to Tractor Supply Co's same-store sales turning negative last quarter. Still, the majority of the company's revenue comes from essential consumable categories: livestock feed, farm supplies, and pet products. As long as the core customer base is maintained, this foundational sales segment is highly resilient. The company continues to expand its store count, planning to grow from the current 2,600 stores to approximately 3,200 by 2030, supporting long-term sales growth. Additionally, in May, the company completed the acquisition of VIP Petcare, a mobile veterinary service provider with over 2,700 partner retail locations, potentially opening up new growth avenues.
Why now is the time to act
Whether valued by EBITDA or simply by net profit price-to-earnings ratio, Tractor Supply Co's current valuation has fallen to a near-decade low range. While the stock price hasn't yet entered deep-value extremes, it represents a significant discount for a company with a long-term stable operating record. At the same time, the dividend yield has reached 2.7%, significantly higher than its 10-year average of 1.5%. The company has raised its dividend for 15 consecutive years, and current payouts consume only 49% of net profit, leaving ample room for future dividend increases. As an added bonus, over the past decade, management has consistently executed share buybacks, reducing the average annual diluted share count by 2.4%, cumulatively canceling one-fifth of the shares and continuously enhancing shareholder value. Leveraging its leadership position in a niche market, a highly sticky membership system, and a decade-defying valuation, I plan to follow the company's CEO and President in buying TSCO soon.