Be Sure To Check Out Tractor Supply Company (NASDAQ:TSCO) Before It Goes Ex-Dividend

Tractor Supply Company (NASDAQ:TSCO) is about to trade ex-dividend in the next 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company’s books in order to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn’t show on the record date. Therefore, if you purchase Tractor Supply’s shares on or after the 25th of November, you won’t be eligible to receive the dividend, when it is paid on the 10th of December.

The company’s upcoming dividend is US$1.10 a share, following on from the last 12 months, when the company distributed a total of US$4.40 per share to shareholders. Looking at the last 12 months of distributions, Tractor Supply has a trailing yield of approximately 1.6% on its current stock price of US$272.85. If you buy this business for its dividend, you should have an idea of ​​whether Tractor Supply’s dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Tractor Supply

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Tractor Supply paid out a comfortable 42% of its profit last year. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the last year, it paid out more than three-quarters (87%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

It’s positive to see that Tractor Supply’s dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company’s analyst payout ratio, plus estimates of its future dividends.

Businesses with strong growth prospects usually make the best dividend payers, because it’s easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we’re glad to see Tractor Supply’s earnings per share have risen 19% per annum over the last five years. The company paid out most of its earnings as dividends over the last year, even though business is booming and earnings per share are growing rapidly. We’re surprised that management has not elected to reinvest more in the business to accelerate growth further.

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