My Top Dividend Stock to Buy in September

A Strong Retail Model with Sustainable Growth Potential

Tractor Supply (NASDAQ: TSCO) stands out as a unique player in the retail sector, particularly for its focus on rural and lifestyle markets. As the largest rural lifestyle retailer in the United States, the company serves a diverse customer base that includes farmers, ranchers, pet owners, and homeowners. What makes Tractor Supply especially appealing to investors is its emphasis on high-frequency purchases such as pet food and animal feed. These products ensure consistent customer traffic and repeat business, forming the backbone of a resilient retail model.

Despite some recent market volatility, shares of Tractor Supply have remained relatively stable this summer, offering an attractive entry point for long-term investors. The company has shown steady improvement in key metrics, including comparable store sales, which rose by 1.5% in the second quarter of 2025. This marks a positive shift from the first quarter, where comparable store sales had declined by 0.9%. Management remains optimistic about the second half of the year, projecting stronger performance driven by improved trends in transactions and average ticket prices.

Strong Performance and Optimistic Outlook

In Q2 2025, Tractor Supply reported net sales of $4.44 billion, reflecting a 4.5% increase compared to the previous year. The company also saw a 1% growth in transactions and a slight rise in average ticket size. These results are part of a broader trend of improvement, with management reaffirming its full-year outlook for net sales growth between 4% and 8%, and comparable store sales growth ranging from flat to 4%.

The company’s strategy is centered around its core categories—consumables, usable items, and edibles (CUE)—which drive consistent traffic. Additionally, initiatives like final mile delivery and Project Fusion, a store remodel program, are expected to provide further momentum. Management is confident that the second half of the year will see stronger comp sales, supported by easier comparisons and continued engagement from the company’s loyalty program, Neighbor's Club.

A Dividend Strategy Built for Growth

While Tractor Supply’s current dividend yield of approximately 1.5% may not be eye-catching on its own, the company’s history of dividend growth is a compelling factor for income-focused investors. In February, the board approved a 4.5% increase in the quarterly dividend, raising it to $0.23 per share. Over the past five years, the company has maintained a mid-20s annual dividend growth rate, supported by strong profitability and a conservative payout ratio.

Using the midpoint of the company’s 2025 earnings per share (EPS) guidance of $2.00 to $2.18, the payout ratio is estimated at around 44%. This leaves ample room for future dividend increases, even if comparable store sales grow at a more modest pace. The company’s financial position is solid, with strong cash generation that supports both dividends and stock buybacks. Additionally, Tractor Supply continues to expand its footprint through new store openings and investments in digital and supply chain infrastructure.

Reasonable Valuation and Long-Term Potential

At a stock price of roughly $60, Tractor Supply trades near 29 times its 2025 EPS guidance. For a company with high customer frequency, a loyal customer base, and a clear path for store growth and margin expansion, this valuation appears fair. If the company meets or exceeds management’s expectations for second-half performance, the stock could offer strong returns over time.

However, investors should remain aware of potential risks, including the impact of tariffs on pricing and costs, weather-related disruptions in seasonal categories, and the uncertain economic environment affecting discretionary spending. Despite these challenges, management has acknowledged the headwinds while maintaining its full-year guidance, which reinforces confidence in the company’s long-term prospects.

Conclusion: A Compelling Investment for Dividend Investors

Tractor Supply may not deliver explosive growth, but its combination of improving comparable store sales, a disciplined dividend policy with room for future increases, and a reasonable valuation makes it an attractive option for investors seeking steady, repeatable progress. While it may not be the top pick for all investors, for those focused on dividend growth and long-term value, Tractor Supply offers a solid foundation for a diversified portfolio.