Tesco (LON: TSCO) is a renowned British supermarket name. Since its inception, the company has strategically expanded its operations, gaining prominence not only in its home market but also internationally. Tesco shares continue to be a staple amongst dividend seekers, and warrant a more detailed look.
Tesco has achieved a rare feat in appealing to all segments of the market. The company’s core strategy revolves around its wide range of products, catering to various customer preferences across different product categories
The supermarket giant’s forward-thinking, including the implementation of its Clubcard, demonstrates its commitment to enhancing customer experience. The company previously had its own banking arm but recently agreed to sell it to Barclays. Furthermore, Tesco has a mobile phone network division that operates in the UK, Ireland, Slovakia, and the Czech Republic.
Tesco shares are listed on the London Stock Exchange under the symbol TSCO.
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Tesco EPS and Revenue Breakdown 2020-2023
| Tesco | Annual EPS | Annual Revenue |
|---|---|---|
| 2020 | 18.23p | £64.76 billion |
| 2021 | 11.58p | £57.90 billion |
| 2022 | 21.86p | £61.30 billion |
| 2023 | 21.85p | £65.76 billion |
The leading British multinational retailer has a compelling history that traces back to its humble beginnings in 1919 when Jack Cohen, the founder, started selling surplus groceries from a stall in London’s East End. Over the years, Tesco expanded its operations, embracing innovation and strategic acquisitions to become one of the largest and most successful retailers in the world.
The business rapidly grew, establishing its first store in 1929 and later bringing the concept of self-service supermarkets to the UK. Embracing new ideas, Tesco was among the first to introduce innovations such as self-service tills and loyalty schemes, further enhancing its position in the market.
The supermarket giant’s international endeavours have also been significant (although some have been unsuccessful), with expansions into numerous countries solidifying its global presence. By entering into joint ventures with local partners and making strategic acquisitions, Tesco has successfully extended its footprint across various regions, including the Czech Republic, Slovakia, and other countries.
Tesco Share Price & Dividend Yield
Tesco shares have made strong gains since October 2023, but the overall story is slightly different, with the stock well below its highs achieved in 2007 and 2010. Be aware that there was a stock split in February 2021. However, Tesco shares are still way off their 2015 lows, and investors will be hoping Tesco can continue to climb.
When it comes to dividends, Tesco has a history of dividend payouts to shareholders. At the time of writing (March 19, 2024), its dividend yield is 3.82%.
UK Supermarket Industry Comparison
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Tesco Share Price Forecast
In a recent note, Goldman Sachs raised its rating for Tesco to Conviction Buy from Buy with a 360p price target. The investment bank said its more bullish view of the stock is driven by an “out-of-consensus expectation” of a rational UK food market with volume growth and inflation in 2024. In its initial coverage of the stock, Goldman Sachs said its bullish view reflected the supermarket company’s successful focus on market share progress, value for customers, and leading free cash flow margins compared to peers.
On the other hand, JPMorgan downgraded Tesco to Underweight from Neutral in December 2023, with a new price target of 230p, down from 240p per share. Analysts at the bank anticipate disinflation resulting in lower like-for-like sales, impacting margins and valuations in the European food retail sector.
Our View: Tesco is a well-respected name and one we view positively. While surging share price growth is not something to expect with Tesco, it does have the ability to grind higher, while its dividend payments are seen as attractive for income-focused investors.
Who Might Buy Tesco Shares
If you are stuck asking yourself, “Should I buy Tesco shares?” you are unlikely to find an exact answer for your personal situation. Some things to consider when evaluating the suitability of shares in Tesco being added to your investment portfolio include its historical price performance, future predictions, and looking at how the business reacts during certain periods, such as economic downturns.
In a more general sense, investors with a moderate to low-risk tolerance may consider Tesco a suitable option. The company’s performance is influenced by a range of market dynamics, and investors comfortable with exposure to these factors may find Tesco shares align with their risk tolerance. The company’s products are required regardless of the current economic environment, making it one to consider for those looking for more of a safer stock.
Tesco’s share price growth has faced challenges in recent years, requiring investors to adopt a long-term view. Although the stock’s performance does not exhibit significant upside momentum, it may still appeal to investors seeking stability and potential long-term growth opportunities in the retail sector.
Investors with a focus on dividend income might find Tesco shares attractive, as the company has historically offered reliable dividend payouts, providing potential income opportunities for income-oriented investors.
Tesco shares may appeal to investors seeking exposure to the retail sector, particularly within the context of global retail and consumer goods markets. If you are ready to start but need some guidance, we have a guide on how to buy Tesco shares that can help.
