Packaging Corp of America rising ever higher, is it still the time to buy some?

Summary:

#1 PKG stock price has surged in 2017 compared to its competitors

#2 After 6 consecutive years with a dividend increase, PKG can be considered a dividend growth holding

#3 As the corrugated product industry is declining, we can wonder how PKG will find growth in the future

What Makes Packaging Corp of America (PKG) a Good Business?

Packaging Corp of America is a producer of container board and corrugated products in the US. Further, it also produces multi-color boxes and displays, as well as meat boxes and wax-coated boxes for the agricultural industry. The company is present across the U.S., thanks to the acquisition of Boise Inc in 2013:

Source: PKG investors presentation

PKG shows 85% of business in corrugated containers and 15% in white paper. Its main competitors are International Paper (IP) and Westrock (WRK). Both competitors show larger market cap (22.82B and 14.46B respectively).

Revenue

Revenue Graph from Ycharts

The important revenue jump that happened between 2014 and 2015 is due to the acquisition of Boise inc for $1.995 Billion during the last quarter of 2013. This acquisition opened the territory of Pacific Northwest to PKG and boosted their container board capacity by 42% and their corrugated product volume by 30%.

While we may think the industry of corrugated boxes may be one of the biggest winner of the “Amazon era” where everything is shipped using these kinds of products, the global industry is actually declining:

Source: PKG investors presentation

While PKG specializes in corrugated products and has gained serious market shares (roughly 10% of the market today), the company still evolve in a difficult environment.

How PKG fares vs My 7 Principles of Investing

We all have our methods for analyzing a company. Over the years of trading, I’ve been through several stock research methodologies from various sources. This is how I came up with my 7 investing principles of dividend investing. Let’s take a closer look at them.

Source: Ycharts

Principle #1: High Dividend Yield Doesn’t Equal High Returns

My first investment principle goes against many income seeking investors’ rule: I try to avoid most companies with a dividend yield over 5%.  Few investments like this will be made in my case (you can read my case against high dividend yield here). The reason is simple; when a company pays a high dividend, it’s because the market thinks it’s a risky investment… or that the company has nothing else but a constant cash flow to offer its investors. However, high yield hardly come with dividend growth and this is what I am seeking most.

Source: data from Ycharts.

PKG dividend yield has been going between 2% and 3.5% for most of the past decade (besides 2 stock price dip in 2009 and 2016). At the current yield of 2.27%, nothing indicates the company is showing any problems.

PKG meets my 1st investing principles.

Principle#2: Focus on Dividend Growth

Speaking of which, my second investing principle relates to dividend growth as being the most important metric of all. It proves management’s trust in the company’s future and is also a good sign of a sound business model. Over time, a dividend payment cannot be increased if the company is unable to increase its earnings. Steady earnings can’t be derived from anything else but increasing revenue. Who doesn’t want to own a company that shows rising revenues and earnings?

Source: Ycharts

Packaging Corp of America  made a surprising decision of cutting their dividend in 2009. At this time, the economy was in a deep recession and unemployment rate kept hiking higher each quarter. Management made a courageous decision to cut their dividend upon darker economic outlook for the future. Since then, the company has compensated shareholders with 6 consecutive years with a dividend raise.  A further analysis of the company payout ratios will tell us if history will repeat itself or if this was just a smart move considering the previous headwinds’ management was facing.

PKG meets my 2nd investing principle.

Principle #3: Find Sustainable Dividend Growth Stocks

Past dividend growth history is always interesting and tells you a lot about what happened with a company. As investors, we are more concerned about the future than the past. This is why it is important to find companies that will be able to sustain their dividend growth.

Source: data from Ycharts.

We can now understand how they company cut their dividend as the cash payout ratio rose over 200% the following year. This means the company was burning significant cash and hasn’t enough to pay their shareholders. However, the situation has greatly improved since then.

With low payout ratio and already 6 consecutive years with a dividend increase, PKG is well on its way to become a Dividend Achiever in a few years. The Dividend Achievers Index refers to all public companies that have successfully increased their dividend payments for at least ten consecutive years. At the time of writing this article, there were 265 companies that achieved this milestone. You can get the complete list of Dividend Achievers with comprehensive metrics here.

PKG meets my 3rd investing principle.

Principle #4: The Business Model Ensure Future Growth

 

I’ve given some thoughts about PKG business model and I’m not sure where the company advantages will ensure growth in the future. Let’s put it this way: a card box is a card box. The world may need them, but they don’t need PKG’ specific card boxes…

The company has been able to ensure growth through acquisitions over the past decade and enjoyed relatively high margins as the industry is controlled by a handful of players. However, I doubt PKG can find “bargains” to acquire in this industry in the upcoming years.

PKG doesn’t meet my 4th investing principle.

 

Principle #5: Buy When You Have Money in Hand – At The Right Valuation

I think the perfect timing to buy stocks is when you have money. Sleeping money is always a bad investment. However, it doesn’t mean that you should buy everything you see because you have some savings aside. There is a valuation work to be done. To achieve this task, I will start by looking at how the stock market valued the stock over the past 10 years by looking at its PE ratio:

Source: data from Ycharts.

Wow…. Looking at PKG PE ratio is like looking at a roller coaster. Is this company should trade an 8 PE or 28? There is one thing this graph is telling us: the recent stock surge is 100% links to Mr. Market thinking PKG is a great company. Earnings didn’t support such rise.

Digging deeper into this stock valuation, I will use a double stage dividend discount model. As a dividend growth investor, I rather see companies like big money making machine and assess their value as such.

Input Descriptions for 15-Cell Matrix INPUTS
Enter Recent Annual Dividend Payment: $2.52
Enter Expected Dividend Growth Rate Years 1-10: 8.00%
Enter Expected Terminal Dividend Growth Rate: 5.00%
Enter Discount Rate: 10.00%

Here are the details of my calculations:

Calculated Intrinsic Value OUTPUT 15-Cell Matrix
Discount Rate (Horizontal)
Margin of Safety 9.00% 10.00% 11.00%
20% Premium $101.15 $80.23 $66.33
10% Premium $92.72 $73.55 $60.80
Intrinsic Value $84.29 $66.86 $55.27
10% Discount $75.86 $60.17 $49.75
20% Discount $67.43 $53.49 $44.22

 

Source: how to use the Dividend Discount Model

While the company raised their dividend 14.5% in 2016, I don’t think this type of dividend growth is sustainable over the long haul. For this reason, I’ve taken an 8% dividend growth rate for the first 10 years and then reduced it to 5% as I don’t see how the business of packaging could possibly surge in the future. PKG seems highly overvalued.

PKG doesn’t meet my 5th investing principle

Principle #6: The Rationale Used to Buy is Also Used to Sell

I’ve found that one of the biggest investor struggles is to know when to buy and sell his holdings. I use a very simple, but very effective rule to overcome my emotions when it is the time to pull the trigger. My investment decisions are motivated by the fact that the company confirms or not my investment thesis. Once the reasons (my investment thesis) why I purchase shares of a company  are not valid anymore, I sell and never look back.

Investment thesis

You can expect I’m not too keen on formulating an investment thesis on PKG. I don’t see any competitive advantage that can’t be replicated by its larger competitors. The company evolves in a slowing down industry where we use less paper and where even the Amazon era can’t boost the usage of corrugated products enough to cope for other segment decline.

 

Potential Risks

After a decade of consolidation in this industry, I don’t see how PKG could possibly purchase cheap competitors. In fact, pressure could come from WRK and IP in a potential price war leading to smaller margins for everybody.

Also, I think it’s important to remember what happened last time the economy entered in a recession: PKG slashed its dividend. While I think it was the right decision at that time for the company, this is definitely not something I want to see as a shareholder. The last dividend cut teaches us two things: #1 management is cautious and responsible (which is a good thing), #2 PKG evolves in a fragile industry where economy cycles have a big impact on their results (bad thing).

PKG doesn’t show a solid investment thesis and doesn’t meet my 6th investing principle.

 

 

Principle #7: Think Core, Think Growth

My investing strategy is divided into two segments: the core portfolio built with strong & stable stocks meeting all our requirements. The second part is called the “dividend growth stock addition” where I may ignore one of the metrics mentioned in principles #1 to #5 for a greater upside potential (e.g. riskier pick as well).

 

Unfortunately, while there was an interesting opportunity to buy PKG during the dip in 2016, I don’t see where this company would fit in my holding. Their industry is slowing down and there isn’t much growth potential elsewhere.

Final Thoughts on PKG – Buy, Hold or Sell?

In short: PKG is a sell. If you were lucky enough to buy it in 2016, cash your profit and find a better holding that will pay you growing dividend for several years to come.

Disclaimer: I do not hold PKG in my DividendStocksRock portfolios.

The opinions and the strategies of the author are not intended to ever be a recommendation to buy or sell a security. The strategy the author uses has worked for him and it is for you to decide if it could benefit your financial future. Please remember to do your own research and know your risk tolerance.

Title: Altria Can be Saved by Its Sister

Summary:

#1 Altria is stuck with a highly profitable product with less and less consumers to buy it.

#2 Management is making serious effort in diversification.

#3 Philip Morris innovative heated tobacco products may become a serious growth vector.

9 years ago, Altria (MO) has made the decision of “unlocking” value for shareholders and spun-off its international division into Philip Morris International (PM). While the number of cigarette smokers is growing throughout most emerging markets, it’s the opposite situation happening in the U.S. where MO is active. While the company is making serious money, where could it go in ten years from now if its clients are disappearing one after the other? Its sister company may have found the solution. Let’s dig into Altria to discover if its worthy of your portfolio.

What Makes Altria (MO) a Good Business?

Altria is one of the largest producer and distributor of tobacco products. These products are highly profitable and lead to repetitive sales. Over the years, regulations around marketing and branding of tobacco products have somewhat protected MO major brands from erosion. Since then, MO benefits from a competitive advantage as its brand is very strong and no marketing can hit it.

However, since the number of American cigarette consumers is decreasing, MO has been working on diversification. Their efforts resume into acquiring 10% of BUD, creating e-vapor brands and operating Ste. Michelle Wine Estates, their smallest but also fastest growing business segment.

Source: 2016 MO investors highlights

However, these efforts haven’t changed MO business model that much:

Author’s table, 2016 annual report numbers

Revenue

Revenue Graph from Ycharts

Since the spin-off, Altria is showing consistent growing revenues. The company benefits from strong pricing power to support this growth. Unfortunately, the reality will hit Altria sooner or later:

Source: Centers of Disease Control and Prevention (CDC)

The number of smokers is clearly decreasing in the U.S. Altria is well aware of this situation and this is why management is looking for diversification. A new hope has risen since PM has developed a new kind of product called IQOS system.

Instead of burning the tobacco, this innovative version of the e-cigarette is heating it. The product is currently being under FDA review to determine which kind of product regulations and taxes will apply to it. MO has the exclusive right on this technology in the U.S.

How MO fares vs My 7 Principles of Investing

We all have our methods for analyzing a company. Over the years of trading, I’ve been through several stock research methodologies from various sources. This is how I came up with my 7 investing principles of dividend investing. Let’s take a closer look at them.

Source: Ycharts

Principle #1: High Dividend Yield Doesn’t Equal High Returns

My first investment principle goes against many income seeking investors’ rule: I try to avoid most companies with a dividend yield over 5%. Very few investments like this will be made in my case (you can read my case against high dividend yield here). The reason is simple; when a company pays a high dividend, it’s because the market thinks it’s a risky investment… or that the company has nothing else but a constant cash flow to offer its investors. However, high yield hardly come with dividend growth and this is what I am seeking most.

Source: data from Ycharts.

MO has always been generous with its shareholders. You can see that as the dividend grew over the past 5 years, MO yield tend to go down. This is because the stock surged by 105.78% over the past 5 years (as at July 19th 2017). At over 3%, MO remains a very interesting stock.

MO meets my 1st investing principles.

Principle#2: Focus on Dividend Growth

Speaking of which, my second investing principle relates to dividend growth as being the most important metric of all. It proves management’s trust in the company’s future and is also a good sign of a sound business model. Over time, a dividend payment cannot be increased if the company is unable to increase its earnings. Steady earnings can’t be derived from anything else but increasing revenue. Who doesn’t want to own a company that shows rising revenues and earnings?

Source: Ycharts

Altria has increased its dividend 50 times in the past 48 years. This make the company part of the dividend achievers lists. The Dividend Achievers Index refers to all public companies that have successfully increase their dividend payments for at least ten consecutive years. At the time of writing this article, there were 265 companies that achieved this milestone. You can get the complete list of Dividend Achievers with comprehensive metrics here.

MO meets my 2nd investing principle.

Principle #3: Find Sustainable Dividend Growth Stocks

Past dividend growth history is always interesting and tells you a lot about what happened with a company. As investors, we are more concerned about the future than the past. this is why it is important to find companies that will be able to sustain their dividend growth.

Source: data from Ycharts.

Please note the reason the payout ratio goes went down dramatically is because of the gain realised on AB InBev/SABMiller business combination. In other words, this is a one-time adjustment that should not be considered.

Therefore, the “real” payout ratio is more about 80%. While I’m satisfied with a 80% payout ratio, I will pay a close attention to it in the future.

MO meets my 3rd investing principle.

Principle #4: The Business Model Ensure Future Growth

The core business of MO has been and will remain tobacco products. While Altria benefits from a strong branding and the pricing power that comes with it, its number of clients is decreasing year after year. Additional growth vectors must be added to the equation before it’s too late. The 10% participation in ABInBev, the increasing wine segment and the potential of heated tobacco are enough factors for me to consider Altria a growing company for now.

MO still shows a strong business model and meets my 4th investing principle.

Principle #5: Buy When You Have Money in Hand – At The Right Valuation

I think the perfect timing to buy stocks is when you have money. Sleeping money is always a bad investment. However, it doesn’t mean that you should buy everything you see because you have some savings aside. There is a valuation work to be done. In order to achieve this task, I will start by looking at how the stock market valued the stock over the past 10 years by looking at its PE ratio:

Source: data from Ycharts.

If you ignore the recent PE drop due to special item in their most recent quarter, MO is being traded at an ever increasing PE ratio. While I understand the attractive perspective of MO cash flow generation abilities, I start to think it is overpriced.

Digging deeper into this stock valuation, I will use a double stage dividend discount model. As a dividend growth investor, I rather see companies like big money making machine and assess their value as such.  I think MO is able to maintain a 8% dividend growth rate for the first 10 years as MO is generating lots of cash flow and has the possibility to market IQOS (pending FDA approval). However, I reduced the terminal rate to 5% as I don’t think revenue growth will be that strong in the future. Since MO revolves in a very stable and mature market and future cash flow are relatively predictable, I used a discount rate of 9%.

Here are the details of my calculations:

Source: how to use the Dividend Discount Model

MO is showing a 10% upside potential at the moment. However, this is assuming a FDA approval for the IQOS system.

MO meets my 5th investing principle with a 10% upside potential

Principle #6: The Rationale Used to Buy is Also Used to Sell

I’ve found that one of the biggest investor struggles is to know when to buy and sell his holdings. I use a very simple, but very effective rule to overcome my emotions when it is the time to pull the trigger. My investment decisions are motivated by the fact that the company confirms or not my investment thesis. Once the reasons (my investment thesis) why I purchase shares of a company  are not valid anymore, I sell and never look back.

Investment thesis

A leading company in a well-protected market is always a good source of cash flow. Altria can continue generating cash for shareholders for several years to come. While growth factors are interesting but not incredible, the outcome of the IQOS system on the market will be crucial. However, regardless of this option, MO is still a solid dividend payer that will continue increasing its payout for the next decade.

MO shows a solid investment thesis and meets my 6th investing principle.

Principle #7: Think Core, Think Growth

My investing strategy is divided into two segments: the core portfolio built with strong & stable stocks meeting all our requirements. The second part is called the “dividend growth stock addition” where I may ignore one of the metrics mentioned in principles #1 to #5 for a greater upside potential (e.g. riskier pick as well).

Altria evolves in a mature market with highly predictable outcome. Considering its strong dividend payout history, MO could be part of a core holding for income seeking investors.

MO is a core holding.

Final Thoughts on MO – Buy, Hold or Sell?

While Altria meets my 7 dividend growth investing principles, I’ve decided not to pull the trigger on this one. I’m not too keen about the tobacco industry and sales could erode faster if the company doesn’t come with new products in the next decade. I respect its dividend growth potential, but I will leave MO to other investors.

Disclaimer: I do not hold MO in my DividendStocksRock portfolios.

The opinions and the strategies of the author are not intended to ever be a recommendation to buy or sell a security. The strategy the author uses has worked for him and it is for you to decide if it could benefit your financial future. Please remember to do your own research and know your risk tolerance.

Tractor Supply Stock Plunged, Time to Buy

Over the past 12 months, Tractor Supply (TSCO) stock price has suffered greatly with a drop of 45%. At the same time, revenues, earnings and dividend payments are showing a very strong uptrend. As the stock now yields over 2%, the company caught my attention. The following analysis will tell you why I think TSCO is a buy. However, nothing is perfect, and there are also risks of catching a falling knife.

What Makes Tractor Supply a Good Business?

Tractor Supply is the largest rural lifestyle retailer in the U.S. Founded in 1938, it now shows nearly $7 billion in sales and operates 1,700 stores across 49 states. They offer a wide variety of products: (1) equine,(2) hardware, (3) seasonal products, (4) work/recreational clothing and footwear and (5) maintenance products for agricultural and rural use.

Source: TSCO 2017 presentation

While TSCO competes with other big box retailers such as Home Depot (HD), Lowe’s (LOW), and Walmart (WMT), the company differentiates itself by focusing on rural areas (vs urban and suburban like the others), offering higher-end products and targeting farm owners, ranchers, and horse owners to build their client base. TSCO also offers a wide variety of products specifically engineered for the “do-it-yourself” customers.

Revenue

Revenue Graph from Ycharts

TSCO shows a very impressive revenue growth rate over the past decade. However, it is important to differentiate total revenues and comparable sales growth. The latter is a lot less impressive as stated in  TSCO most recent quarterly update:

“The decrease in comparable store sales was primarily driven by lower sales of seasonal merchandise and the impact of deflation. On a regional basis, sales were most challenged in the Northern regions, where weather had a more pronounced impact on sales for the quarter. The weakness in seasonal categories was partially offset by a positive comparable store sales increase in the Livestock and Pet category.”

Source: April 26th 2017 Press Release

The thing is TSCO focuses massively on growing its number of stores across the U.S. to sustain its growth. Management objective is to grow from 1,606 TSC stores in 2017 to 2,500. You can imagine how fast total revenues will continue to grow in the upcoming years.

Source: TSCO 2017 presentation

Unfortunately, if comparable store sales growth continues to slow down, there is no point in getting excited by TSCO revenue trend.

How TSCO Fares vs My 7 Principles of Investing

We all have our methods for analyzing a company. Over the years of trading, I’ve been through several stock research methodologies from various sources. This is how I came up with my 7 investing principles of dividend investing. Let’s take a closer look at them.

Source: Ycharts

Principle #1: High Dividend Yield Doesn’t Equal High Returns

My first investment principle goes against many income seeking investors’ rule: I try to avoid most companies with a dividend yield over 5%. Very few investments like this will be made in my case (you can read my case against high dividend yield here). The reason is simple; when a company pays a high dividend, it’s because the market thinks it’s a risky investment… or that the company has nothing else but a constant cash flow to offer its investors. However, high yield hardly come with dividend growth and this is what I am seeking most.

Source: data from Ycharts.

Considering a yield below 1% since the beginning of its dividend history, TSCO has always been flying under my radar until recently. At first glance, the recent stock price drop created an interesting opportunity for dividend investors as currently the yield is now around 2%. If the company shows it can sustain its dividend growth trend, it will certainly become a very interesting dividend play.

TSCO meets my 1st investing principles.

Principle#2: Focus on Dividend Growth

Speaking of which, my second investing principle relates to dividend growth as being the most important metric of all. It proves management’s trust in the company’s future and is also a good sign of a sound business model. Over time, a dividend payment cannot be increased if the company is unable to increase its earnings. Steady earnings can’t be derived from anything else but increasing revenue. Who doesn’t want to own a company that shows rising revenues and earnings?

Source: Ycharts

Tractor Supply started paying a modest dividend in 2010. Each year, management has successfully increased its payout since then. 2017 is the 6th consecutive year with a dividend increase. While the company started with a small yield, it shows a strong uptrend since the beginning.

TSCO meets my 2nd investing principle.

Principle #3: Find Sustainable Dividend Growth Stocks

Past dividend growth history is always interesting and tells you a lot about what happened with a company. As investors, we are more concerned about the future than the past. this is why it is important to find companies that will be able to sustain their dividend growth.

Source: data from Ycharts.

TSCO requires lots of cash flow to support its growth as management invests between $250M to $300M to grow its stores number (TSCO 2017 presentation). Still, the company has managed to control its payout ratio around 30% and its cash payout ratio between 35% and 65% since it has started to reward shareholders with dividends.

Management benefits from lots of room for future increase, opening the door for another decade of strong dividend raises. Dividend growth investors should not worry with TSCO for the next decade.

TSCO meets my 3rd investing principle.

Principle #4: The Business Model Ensure Future Growth

Past numbers are always interesting to analyze, but it doesn’t necessarily tell you what is coming up next. A company with a strong business model will be able to evolve accordingly and continue to provide value to its shareholders.

TSCO is also well aware of the Amazon (AMZN) wave that could hurt its future growth. For this reason, management has focused on improving their digital marketing by enhancing their website search capabilities, creating a mobile centric application and developing an “order online, pick-up in store” offer.

On the other side, TSCO is somewhat shielded from the online wave at the moment due to several products being too heavy to be shipped at a competitive price. By focusing on rural or do-it-yourself customers, TSCO benefits from a solid and loyal client base.

With the opening of a new distribution center in New York by 2018, the company will also be able to improve its margins with lower distribution costs.

Lastly, Tractor Supply is also protecting a part of its business against ecommerce giants by promoting private label and exclusive brand products. If you can’t find it online, then you have to come to TSCO to buy it.

TSCO still shows a strong business model and meets my 4th investing principle.

Principle #5: Buy When You Have Money in Hand – At The Right Valuation

I think the perfect timing to buy stocks is when you have money. Sleeping money is always a bad investment. However, it doesn’t mean that you should buy everything you see because you have some savings aside. There is valuation work to be done. In order to achieve this task, I will start by looking at how the stock market valued the stock over the past 10 years by looking at its PE ratio:

Source: data from Ycharts.

With the most recent stock price drop, TSCO looks like a very attractive buy. However, let’s keep in mind that TSCO sales per store aren’t growing at the moment and most of their revenues and earnings growth is directly attributable to new stores opening. At one point in time, TSCO risks market saturation and cannibalization of its own stores.

Digging deeper into this stock valuation, I will use a double stage dividend discount model. As a dividend growth investor, I rather see companies like big money making machines and assess their value as such. I expect a strong dividend growth rate for the next 10 years reflecting the company’s store expansion across the U.S. Then, I think TSCO will have to go back to a more conservative growth rate. Since the company is well established and it is a leader in its industry, I use a discount rate of 9%.

Here are the details of my calculations:

Source: Dividend Monk Toolkit Excel Calculation Spreadsheet

Using the DDM, I get a fair value at $61.77. I think it makes sense as there is definitely a wind of panic around TSCO that is not justified at the moment.

TSCO meet my 5th investing principle with a potential upside of 20%

Principle #6: The Rationale Used to Buy is Also Used to Sell

I’ve found that one of the biggest investor struggles is to know when to buy and sell their holdings. I use a very simple, but very effective rule to overcome my emotions when it is the time to pull the trigger. My investment decisions are motivated by the fact that the company confirms or not my investment thesis. Once the reasons (my investment thesis) why I purchase shares of a company  are not valid anymore, I sell and never look back.

Investment thesis

An investment in TSCO is a statement of confidence in management’s ability to reverse same store sales growth trend while pursuing their ambitious growth plan. Management shows a steady usage of its cash flow rewarding shareholders with growth and dividend payouts:

Source: TSCO 2017 presentation

I think TSCO is a strong player in their narrowed niche which makes it very difficult for other competitors (HD, LOW or online giants) to grab their market shares. While other online companies will have a hard time competing due to shipment costs of heavy items, TSCO offers a great solution to their customers with their “order online, pick-up at a store” feature.  There is room for improvement in margins and this is why management will open a new distribution center in 2018.

The only thing missing for TSCO stock to rise again is stronger same store sales growth. This could be achieved through a good product mix and improvement to their loyalty program.

TSCO shows a solid investment thesis and meet my 6th investing principle.

Principle #7: Think Core, Think Growth

My investing strategy is divided into two segments: the core portfolio built with strong & stable stocks meeting all our requirements. The second part is called the “dividend growth stock addition” where I may ignore one of the metrics mentioned in principles #1 to #5 for a greater upside potential (e.g. riskier pick as well).

In ten years from now, it will be hard to find aggressive growth potential for Tractor Supply as all rural areas will likely be covered. In the meantime, I think the company will benefit from a strong stock price uptrend the minute their sales are going back into positive territories. This play incurs additional risks due to the current situation, but I believe TSCO has enough cards in its hand to win its bet.

TSCO is a growth holding.

Final Thoughts on TSCO – Buy, Hold or Sell?

Catching a falling knife is always a tricky operation. However, after reviewing the company’s fundamental and growth potential, I believe TSCO has reached the bottom and offers an interesting play for dividend growth investors. TSCO is a BUY.

Disclaimer: I do not hold TSCO in my DividendStocksRock portfolios.

The opinions and the strategies of the author are not intended to ever be a recommendation to buy or sell a security. The strategy the author uses has worked for him and it is for you to decide if it could benefit your financial future. Please remember to do your own research and know your risk tolerance.