Casey's General Stores (CASY): A Convenience Retail Powerhouse With Sustainable Growth and Dividend Strength

The convenience store sector has long been a bellwether for consumer resilience, and few companies exemplify this better than Casey's General Stores (NASDAQ: CASY). Recent financial results and strategic moves underscore its position as a leader in an industry primed for growth. With a robust Q4 2024 earnings beat, a record pace of store expansion, and a 26-year streak of dividend hikes, CASY is poised to capitalize on its operational execution, strategic scale, and financial resilience. Here's why investors should take note.

Operational Execution: Fueling Growth Through Efficiency and Margin Discipline

Casey's Q4 2024 results delivered a strong earnings surprise, with diluted EPS of $2.63—up 12.4% year-over-year—and revenue of $3.99 billion, surpassing estimates by 3.4%. The standout was its operational efficiency: same-store labor hours fell for the 12th straight quarter, offsetting wage inflation and contributing to a 50-basis-point expansion in EBITDA margins to 6.6%.

Inside sales—critical to profit margins—grew 12.4% year-over-year, driven by strong demand for bakery items, hot sandwiches, and beverages. While same-store inside sales rose just 1.7% (vs. 5.6% in 2023), this reflected a strategic focus on higher-margin categories. Fuel performance also held steady: gallons sold grew 0.1%, and margins improved to 37.6 cents per gallon, aided by market share gains and operational streamlining.

Strategic Expansion: Building a Nationwide Footprint

Casey's aggressive store expansion is its most potent growth lever. In fiscal 2025, it added 270 stores—a record—through a mix of new construction and acquisitions, including the 198-store Fikes Wholesale deal. This brought total stores to 2,904, up 10% year-over-year.

The goal for fiscal 2026 is to open at least 80 new stores, targeting 500 over three years. This expansion isn't just about quantity: Casey's focuses on high-traffic locations, often in underserved markets. For instance, entering Texas in 2025 expanded its reach to its 17th state, tapping into a large and growing market. The scalability of its model—low capital intensity for acquired stores and proven same-store performance—gives it a clear path to sustained top-line growth.

Financial Resilience: A Strong Balance Sheet and Dividend Machine

Casey's financial health is a cornerstone of its appeal. With $327 million in cash and $900 million in undrawn credit, its liquidity stands at $1.2 billion. Its debt-to-EBITDA ratio of 1.9x is conservative for the sector, providing ample flexibility for acquisitions and dividends.

The dividend itself is a standout: CASY hiked it 14% to $0.57 per share in June 2025, marking its 26th consecutive annual increase. This consistency has built trust with income-focused investors, and the payout ratio (around 30% of earnings) leaves room for further hikes.

FY2026 guidance reinforces this resilience. Management projects EBITDA growth of 10–12%, with inside same-store sales up 2–5% and fuel gallons stable (-1% to +1%). Even with 246 more stores than in 2024, operating expenses are expected to grow only 8–10%, underscoring its ability to manage scale efficiently.

Catalysts for Future Appreciation

1. Store Expansion Pipeline: 80+ new stores in 2026 will add incremental revenue, while acquisitions allow rapid scaling.
2. Inside Sales Growth: A focus on high-margin categories (e.g., prepared foods, beverages) could narrow the gap with prior years' growth.
3. Dividend Momentum: The 26-year streak positions CASY as a premier dividend stock, with room to grow further.
4. Balance Sheet Strength: Low leverage and ample liquidity support M&A and share buybacks (though the $295 million remaining authorization remains untapped).

Risks and Considerations

• Fuel Margin Pressures: Fuel gross profit is sensitive to commodity prices and competition.
• Integration Costs: Acquisitions, like Fikes Wholesale, may incur short-term expenses.
• Labor Management: While labor hours are down, wage inflation remains a risk.

Investment Thesis: A Buy for Long-Term Growth and Income

Despite near-term risks, Casey's execution in scaling operations, diversifying geographically, and maintaining margins makes it a compelling buy. Its dividend strength and balance sheet provide a safety net, while expansion and margin discipline offer upside.

Historically, a simple strategy of buying CASY on earnings beat announcement dates and holding for 30 trading days has delivered strong risk-adjusted returns. The backtest from 2020 to 2025 shows an average return of 29.16%, a maximum drawdown of -7.25%, and a compound annual growth rate (CAGR) of 14.04%, supported by a Sharpe ratio of 1.47—a robust indicator of performance relative to volatility.

Actionable Advice: CASY is a rare blend of growth and income. Investors seeking exposure to the convenience retail sector—or a reliable dividend—should consider accumulating shares, especially if the stock dips on short-term volatility. The company's FY2026 targets are achievable, and its 2,900-store footprint is a moat against competitors.

In a sector where execution matters most, Casey's has proven it can deliver—making it a top-tier play for patient investors.