1 Top Dividend Stock For 2026 That Could Perform Well Even If AI Stocks Fall
Even though stocks fall in 2025 S&P 500 rose sharply, rural retailer Tractor Supply(NASDAQ: TSCO) One of my top dividend stock ideas for 2026. In fact, underperformance despite improving business fundamentals through 2025 is a reason to buy; The shares are likely even more undervalued than they were at the beginning of the year.
But there’s another unique reason to buy Tractor Supply in 2026: It’s a stark contrast to most of Tractor Supply. AI (artificial intelligence)Although the AI boom remains a driving force in 2026, it wouldn’t be surprising for AI stocks to take a breather or even fall after most rose significantly in 2025. Tractor Supply’s simple but powerful needs-based business model represents the type of reliable companies investors can turn to if the market turns negative on AI stocks.
Even if AI stocks continue to rise in 2026, it’s good to have some stocks that will offset AI bets and direct investors to other areas of the market, and with its attractive dividends, Tractor Supply is a good option.
Image source: Getty Images.
Tractor Supply(NASDAQ: TSCO) It is not a high-yield stock. But it is a dividend stock designed for consistency.
The annual dividend is $0.92 per share or $0.23 per quarter. dividend yield 1.8% as of this writing. It’s not small, but it’s also unimpressive. However, it’s worth noting that this dividend yield is easy for the company to maintain. The company’s payout ratio (the percentage of a company’s earnings paid out as dividends) is just 44%. This means that even if Tractor Supply’s earnings don’t grow, the dividend has plenty of room to grow.
One reason to like Tractor Supply is its dividend growth performance.
In February, the company increased its dividend by 4.5%. But don’t think this modest increase represents the company’s typical dividend increase. Zoom out and you’ll see that the company normally makes double-digit raises for investors.
What explains the very modest dividend increase recently?
While the company has finally seen a normalization in its business over the past few years after benefiting from increased demand during the COVID-19 pandemic as people stayed home and spending shifted from services to goods, Tractor Supply’s dividend growth has slowed, reflecting softer sales growth during this period of normalization in consumer spending patterns. But if Tractor Supply returns to more normal business growth now that it faces easier comparisons, dividend growth should also pick up again.
While we may not be able to return to double-digit dividend growth, I expect at least high single-digit increases in the coming years.
More importantly, Tractor Supply is seeking to move toward higher growth rates in key business metrics, including revenue, earnings and comparable store sales.
Tractor Supply increased its net sales by 7.2% year-over-year in the third quarter. Comparable store sales increased 3.9%; This is a significant increase from the prior-year third quarter, when comparable store sales fell 0.2%. Earnings per share grew even faster in the quarter, rising 8.6% year over year; This is a significant acceleration from the 2.8% earnings per share growth the company achieved in the second quarter of 2025.
Management also tabled some attractive long-term targets. The company said at its 2024 Investment Community Day that it expects average annual sales growth from the beginning of 2025 to the end of 2030 to be between 6% and 8%. What’s more, it said it expects earnings per share to grow by an average of 8% to 11%. Driving this growth will be 3% to 5% annual comparable store sales growth, operating margin expansion and a steady pace of new store openings, according to management estimates.
While there are risks, including the possibility of intense competition from e-commerce players, general merchandise stores, and even home goods retailers, Tractor Supply appears to be a good bet overall – especially at its current valuation of 24 times earnings. In addition, the company’s dividend should grow over time, starting from a solid dividend yield base of 1.8%.
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Daniel Sparks and its clients have no positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Tractor Supply. The Motley Fool recommends the following options: Short $58 calls on Tractor Supply in January 2026. The Motley Fool has a feature disclosure policy.
