Despite share price declines in 2025, S&P 500 Index Rural retailers see big gains tractor supply(NASDAQ: TSCO) is one of my best ideas for dividend stocks in 2026. Indeed, despite improving business fundamentals in 2025, its underperformance is still a reason to buy; the stock is arguably even more undervalued now than it was at the beginning of the year.
But there’s another unique reason to buy Tractor Supply in 2026: It stands in stark contrast to many of the 2025 market darlings focused on AI (artificial intelligence). While the AI ​​boom will likely remain a driver in 2026, it wouldn’t be surprising to see AI stocks take a breath or even fall after many AI stocks surged in 2025. And Tractor Supply’s simple but powerful needs-based business model represents the type of reliable company investors might turn to if the AI ​​stock market turns sour.
Even if AI stocks continue to rise in 2026, it’s good to have some stocks that give investors exposure to other areas of the market to balance out their AI bets, and Tractor Supply, with its attractive dividend, is a good choice.
Image source: Getty Images.
tractor supply(NASDAQ: TSCO) Not a high-yield stock. But this is a dividend stock designed for consistency.
The annualized dividend is $0.92 per share, or $0.23 per quarter, and the stock yields 1.8% as of this writing. Not small but not impressive either. It’s worth noting, though, that the company easily maintains this dividend yield. The company’s payout ratio (the percentage of a company’s earnings paid out in the form of dividends) is just 44%. This means that even if Tractor Supply’s earnings don’t grow, there’s still plenty of room for the dividend to grow.
One of the reasons to like Tractor Supply is its track record of dividend growth.
In February, the company raised its dividend by 4.5%. But don’t think this modest increase represents a typical dividend hike for the company. Narrow it down and you’ll find that the company typically offers investors double-digit raises.
What explains the very slow recent dividend growth?
The tractor supply company’s dividend growth has slowed to reflect slower sales growth as the company finally normalized its business over the past few years, benefiting from a surge in demand as people stayed home during the COVID-19 pandemic and spending shifted from services to goods. But if Tractor Supply now returns to more normal business growth, as it allows for simpler comparisons, dividend growth should pick up as well.
While we may not get back to double-digit dividend growth, I at least expect the dividend rate to grow in the high single-digits over the next few years.
Importantly, Tractor Supply is on track to return to higher growth rates on key business metrics, including revenue, earnings and comparable store sales.
Tractor Supply’s third-quarter net sales increased 7.2% year-over-year. Same-store sales increased 3.9%, significantly higher than the 0.2% decrease in same-store sales in the third quarter last year. Earnings per share grew faster in the quarter, rising 8.6% year-over-year, a significant acceleration from the company’s 2.8% EPS growth in the second quarter of 2025.
Management also laid out some attractive long-term targets. At the 2024 Investing Community Day, the company said it expects sales to grow at an average annual rate of 6% to 8% from early 2025 to the end of 2030. What’s more, the company said it expects earnings per share to grow at an average compound rate of 8% to 11%. Management forecasts that this growth will be driven by annualized comparable store sales growth of 3% to 5%, operating margin expansion and a steady pace of new store openings.
While there are risks, including the potential for increased competition from e-commerce players, department stores and even home furnishings retailers, overall, Tractor Supply looks like a good buy, especially given its current valuation of 24 times earnings. Additionally, the company’s dividend should grow over time — and that’s starting from a solid 1.8% dividend yield.
Ever feel like you missed out on an opportunity to buy the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts will publish ‘Double Down’ Stocks Recommend companies they think will be popular. If you’re worried that you’ve missed out on an investment opportunity, now is the best time to buy before it’s too late. The numbers speak for themselves:
NVIDIA:If you invested $1,000 in 2009 when we doubled down,You will have $486,427!*
apple: If you invested $1,000 in 2008 when we doubled down, You will have $51,943!*
Netflix: If you invested $1,000 in 2004 when you doubled down, You will have $505,749!*
Now, we’re issuing a “Double Down” alert for three incredible companiesyou can use it after joiningstock advisorand there may not be another opportunity like this in the short term.
Check out these 3 stocks »
*As of December 29, 2025 Stock Advisor Returns
Daniel Sparks and his clients have no positions in any of the stocks mentioned. The Motley Fool has an interest in and recommends Tractor Supply. The Motley Fool recommends the following options: Short the January 2026 Tractor Supply $58 call. The Motley Fool has a disclosure policy.
Even if AI stocks fall, 1 of the highest dividend stocks to do well in 2026 Originally posted by Motley Fool
