Dividend Increase | Tractor Supply Company $TSCO #Dividend

Dividend | Dividend Growth | Financial Independence | Freedom | Passive Income
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Tractor Supply Company for another dividend increase!

There's an old Chinese proverb that says "the best time to plant a tree was 20 years ago, the next best time is now".  The reason for this is that it takes time for a tree to grow and prosper and for you to start reaping its benefits.  Dividend growth investing is much the same way.  It takes consistent saving and investing as well as time and patience to let the power of dividend growth take hold.

That's why one of my favorite things is when one of the companies I own decides to pay out more in dividends.  You mean I get a pay raise just for owning a small piece of a company?  Not going and doing R&D for new products or technology.  Not selling any products.  Not managing any employees or inventory.  Not making sales calls.  All I had to do was have the foresight to invest some of my savings in excellent companies.  

On February 5th the Board of Directors at Tractor Supply Company (TSCO) announced an increase to their quarterly dividend payment.  The dividend was increased from $1.03 to $1.10 which is a solid 6.8% increase.  Shares currently yield 1.89% based on the new annualized payout.

The new dividend rate will be payable March 12th to shareholders of record as of February 26th.

Since I own 8.7 shares of Tractor Supply in my FI Portfolio, this raise increased my forward 12-month dividends by $2.44.  This is the 2nd raise I've received from Tractor Supply since initiating a position in 2022 with the total organic dividend growth over that time coming to 19.6%.  

A full screen version of this chart can be found here.

Tractor Supply is a Dividend Contender with 15 consecutive years of dividend growth.  Tractor Supply has been able to grow their dividend payment at a very healthy clip over that time.

Since 2010, Tractor Supply's year over year dividend growth has ranged from 6.8% to 76.9% with an average of 29.5% and a median of 22.5%.

There's been 12 rolling 3-year periods over that time with annualized dividend growth spanning from 12.6% to 51.8% with an average of 28.0% and a median of 25.8%.

Over that time there's also been 10 rolling 5-year periods with Tractor Supply's annualized dividend growth landing between 14.6% to 40.3% with an average of 25.0% and median of 25.2%. 

The 1-, 3-, 5- and 10-year rolling dividend growth rates for Tractor Supply Company since 2010 can be found in the following chart.  

A full screen version of this chart can be found here.

For dividend yield theory I consider the fair value range to be the forward dividend yield +/- 10% compared to the 3-year moving average, the under/over value area to be to between 10%-20% deviation from the average and significant over/under value are greater than a 20% deviation from the average.

A full screen version of this chart can be found here.

Tractor Supply Company's 3-year average forward dividend yield is 1.59% which corresponds to a share price of $277 based on the new annualized payout.  

I consider the fair value range based on dividend yield theory to be the 3-year moving average yield +/- 10%.  That gives a fair value range of $252 - $307 and suggests that shares are currently trading below the lower end of fair value.

Wrap Up

This raise increased my forward dividends by $2.44 with zero effort on my part.  That's right, absolutely nothing to contribute to their operations.  Based on my FI Portfolio's current yield of 2.64% this raise is like I invested an extra $92 in capital.  Except that I didn't!  One of the companies I own just decided to send more cash my way. 

That's how you can eventually reach the crossover point where your dividends received exceed your expenses.  That's DIVIDEND GROWTH INVESTING AT WORK!  The beauty of the dividend growth investing strategy is that you build up your dividends through fresh capital investment as well dividend increases from the companies you own.

This is the 7th dividend increase I've received from the companies in my FI Portfolio.  Combined those raises have increased my forward 12-month dividends by $83.47.

My FI Portfolio's forward-12 month dividends are $12,225.59  Including my FolioFirst portfolio's forward dividends of $248.02 brings my total taxable accounts dividends to $12,473.61.  My Roth IRA's forward 12-month dividends are $1,246.88.  My Rollover IRA's forward dividends are $5,106.23.  Across all accounts I can expect to receive $18,826.72 in dividends over the next year.

I've also started compiling dividend data on many of the companies that I own or would like to own.  Tractor Supply Company's can be found here which includes the dividend history (as far back as I can find without spending hours hunting it down), rolling dividend growth rates and dividend yield theory.  To see other companies that I've already gathered the data on you can check out the Dividend Companies page.  Check it out and let me know what you think.

Do you own shares of Tractor Supply?  Do you think their dividend growth will pick back up after their smallest raise ever?  

Please share your thoughts below.