A steadily rising dividend with room for more growth, backed by improving same-store sales.Tractor Supply (TSCO -0.26%) is my pick for dividend investors right now. The company, which is the largest rural lifestyle retailer in the U.S., sells everyday needs for recreational farmers, ranchers, pet owners, and homeowners. Importantly for investors, it's heavy on high-frequency categories like pet food and animal feed -- products that keep its loyal customers coming back regularly.Fortunately, shares have trea ...

Core Insights - Tractor Supply reported Q2 2025 GAAP revenue of $4.44 billion, exceeding the consensus estimate of $4.39 billion, with earnings per share (EPS) at $0.81, above the expected $0.80 [1][2] - The company reaffirmed its full-year outlook, indicating steady performance in core categories and ongoing investments in omnichannel capabilities [1][11] Financial Performance - Q2 2025 EPS (GAAP) was $0.81, a 2.5% increase from $0.79 in Q2 2024 [2] - GAAP revenue rose 4.5% year-over-year from $4.25 billion in Q2 2024 [2] - Operating income increased by 2.9% to $577.8 million compared to $561.5 million in the prior year [2] - Net income was $430 million, a 1.1% increase from $425.2 million in Q2 2024 [2] - Comparable store sales grew by 1.5%, improving from a decline of 0.5% in the previous year [2] Business Strategy and Operations - Tractor Supply operates the largest network of rural lifestyle retail stores in the U.S., focusing on a wide range of essential supplies for recreational farmers, ranchers, and homeowners [3] - The company emphasizes customer loyalty, efficient supply chain management, and expanding digital and omnichannel services [4] - Key success factors include a resilient merchandise mix, a large base of repeat customers, and investments in store modernization and digital experience [4] Sales and Product Trends - Net sales rose 4.5% year-over-year, driven by strength in "needs-based" categories such as animal feed and household staples [5] - Customer traffic increased, with a 1.0% rise in comparable store transaction count and a 0.5% increase in average spending per visit [6] - Gross profit grew by 5.4%, with gross margin expanding by 30 basis points to 36.9% [7] Cost Management and Profitability - Selling, general, and administrative expenses increased by 6.8%, outpacing sales growth and putting pressure on operating margins [7] - The company attributed higher costs to investments in new stores, technology, and supply chain upgrades [7] - Inventory per store remained stable, with inventory turns at 3.60 compared to 3.64 in the prior year [8] Future Outlook - Management reaffirmed full-year guidance, targeting net sales growth of 4% to 8% and comparable store sales growth of 0% to 4% [11] - Capital spending plans focus on new store openings, upgrades, and digital enhancements, with a share repurchase forecast of $325 million to $375 million [11] - Key variables for future quarters include tariff impacts, vendor cost-sharing scenarios, and potential price adjustments [12]

Core Viewpoint - The current economic turmoil in the U.S. presents investment opportunities, echoing Warren Buffett's advice from 2008 to invest in American companies, as highlighted by Jamie Dimon, CEO of JPMorgan Chase [2][3][5]. Company Summaries 1. Tractor Supply - Tractor Supply operates over 2,300 locations in the U.S. and is recognized as the largest rural lifestyle retailer in the country [7]. - The company has experienced minimal growth, with only 15 net new stores opened in Q1 2025 and a projected net sales growth of 4% to 8% for the year [8]. - Operating margins are under pressure, expected to be just under 10% for 2025, down from over 10% in previous years, with potential further declines due to tariffs [9]. - Despite challenges, Tractor Supply has a loyal customer base and has consistently paid and raised dividends for 16 consecutive years [10]. 2. Floor & Decor - Floor & Decor operates around 250 locations in the U.S. and sources 18% of its products from China, which poses challenges [11]. - The company anticipates modest revenue growth for 2025 and expects EPS to decline to $2, down from 2023 results [12]. - Floor & Decor is strategically opening 20 to 25 new stores annually until reaching 500 locations, positioning itself for future profit growth as the housing market rebounds [14][21]. 3. Texas Roadhouse - Texas Roadhouse has nearly 800 restaurants in the U.S., making it a quintessential American stock [15]. - The restaurant chain recorded almost 10% year-over-year revenue growth in Q1 2025, despite a pullback in profit margins [16]. - Management is investing in technology upgrades to improve long-term profit margins, and the brand remains popular among consumers [17][19]. Investment Recommendations - Tractor Supply and Texas Roadhouse are suitable for investors seeking low volatility and consistent business results [20]. - Floor & Decor is recommended for those looking for better growth potential, especially with the anticipated recovery in the housing market [20][21].