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Investors looking for positive indicators of a stock’s future performance often consider a stock split a good sign. As a technical matter, a stock split changes nothing about a company’s performance or value. True, per share numbers must be adjusted, but the underlying revenues and profits aren’t altered—just the per share statistics. Still, companies often split their shares when their stocks have appreciated to the point where investors may question an investment because of limited capital. So, by splitting the shares, the stock becomes more appealing to a broader group of investors and, it is believed, that pent up demand for what is already a dear stock, based on a relatively high price, will help spur the price higher after the split.

Of course, stock prices don’t always continue to ascend after a stock split. And, there are times when companies with low share prices use reverse stock splits to boost share prices above exchange minimums so that they may remain listed. So, a stock split is not the sole criteria by which a company should be judged. That said, it is an interesting indicator that more research about a company could be worthwhile.

Every week on the back page of the Ratings & Reports section of The Value Line Investment Survey is a list of upcoming stock splits. One stock with and upcoming split to consider is Tractor Supply Company (TSCO).

Tractor Supply Company

Tractor Supply Company is the predominant operator of retail farm and ranch stores in the United States. It operates under the Tractor Supply Company and Del’s Farm Supply banners and is three times larger than its five nearest competitors combined. Its niche merchandise selection consists of 16,000 to 19,500 unique products per store, with approximately one quarter of sales being derived from high-margined private label merchandise. Its customer base consists mostly of homeowners with above average incomes and little debt, including recreational farmers and ranchers, as well as those who enjoy the rural, “out here” lifestyle. Product offerings include horse, pet, and small animal products necessary for their health, care, growth, and containment; hardware, truck, towing, and tool products; seasonal items including lawn and garden goods and power equipment, maintenance products and work/recreational clothing and footwear. It operates approximately 1,150 stores in 45 states, and they are generally located in more rural communities.

CUE (consumable, usable, and edible) products such as feed, lubricants, and wood pellets are Tractor’s primary traffic drivers, as they are difficult to find and need to be replenished frequently. Being that these products keep traffic high, the company accepts a slightly lower margin in hopes that customers will spend on more lucrative goods. This is one of the reasons why TSCO has had 20 consecutive quarters of traffic growth. CUE’s are also important because they are fairly resilient to fluctuating economic conditions.

At present, management expects full-year sales to grow 9% to 11%, with same-store sales advancing in the 3% to 5% range. The company recently raised its dividend payout by 30%, and continues to repurchase its shares at a solid pace. According to management, Tractor Supply has the ability to double earnings by 2016-2018.

On August 29, 2013, Tractor Supply announced that its Board of Directors approved a two-for-one stock split of its common stock for shareholders on record at the close of business on September 18, 2013. The additional shares are set to be distributed on September 26, 2013.

The company’s Chairman, Jim Wright, said the split was motivated by the recent operating results and stock price appreciation. Mr. Wright continued, "This stock split will make our stock more affordable to investors, including our customers and team members and is intended to increase the liquidity and accessibility of our stock. This represents our fourth two-for-one split since 2002."

There are a number of other companies with upcoming stock splits. Readers can learn more about them below.

     

Company Name

Next Payment

Ex Date

Ticker

DaVita HealthCare

2 for 1

Sep. 23

DVA

Dean Foods Co.

1 for 2 

Aug. 27

DF

Google, Inc.

2 for 1

GOOG

Madden (Steven) Ltd.

3 for 2

Oct. 1

SHOO

West Pharmac. Services

2 for 1

Sep. 28

WST

Wolverine World Wide

2 for 1

Nov. 4

WWW

       

At the time of this article's writing, the author did not have positions in any of the companies mentioned.