I don’t maintain any Tesco (LSE: TSCO) shares however how they’ve finished currently, I want I did. So what’s stopped me investing within the FTSE 100 grocer?

There have been a number of causes. The UK grocery sector’s extremely aggressive and was being focused by two aggressive entrants — Aldi and Lidl — decided to construct share by driving meals costs decrease. Because the dominant participant, Tesco had most to lose.

FTSE 100 star

The associated fee-of-living disaster squeezed buyers whereas driving up prices. Tesco has loads of these prices, because it has to keep up a series of shops and small military of workers. Margins have been wafer-thin at lower than 3% for years. Let’s see what the chart says:

Chart by TradingView

All of these seem like sound rational arguments for not shopping for, however the proof of the pudding is within the consuming, and the consuming’s been good. The Tesco share price is up 51.47% over 5 years and 30% over 12 months. It additionally breezed by way of final week’s turbulence.

Tesco confirmed its beef in 2024, with full-year statutory revenues up 4.4% to £68.2bn, and retail adjusted working revenue up 10.9% to £2.76bn. It additionally paid off £729m of web debt, decreasing the pile to £9.76bn.

Its good type has run into the 2025 monetary yr, with Q1 gross sales up 4.6% to £11.3bn. Market share’s now rising on the quickest fee in two years, up 52 foundation factors to 27.6%.

The excellent news was overshadowed by a row over CEO Ken Murphy’s £10bn pay packet, boosted by a performance-linked bonus of £8.3m. Can he preserve delivering the products?

Dividend development

Analysts forecast that income development will gradual over the subsequent couple of years, rising a modest 2.43% to £69.85bn in 2025, then 2.17% to £71.37bn 2026. I’m somewhat shocked, as rising actual phrases wages and forthcoming rate of interest cuts ought to make buyers really feel a bit richer. Tesco’s Clubcard additionally provides it extremely priceless perception into purchasers’ tastes. A staggering 22m households have one.

Tesco shares don’t look too costly at 13.94 instances trailing earnings. In addition to development, they’ve been a gradual supply of dividend revenue. The board held the 2023 dividend at 10.9p per share however hiked it 11% to 12.1p in 2024. It’s forecast to pay 13p in 2025, an increase of seven.44% if it comes by way of.

Time will inform, however with retail free money stream doubling to £2.82m in 2024, Murphy can absolutely afford to be beneficiant. The shares are forecast to yield 3.89% in 2025 and 4.23% in 2026.

Primarily based on the forecast 13p dividend per share, I’d want to purchase 7,692 Tesco shares to hit my dividend revenue goal of £1,000 a yr. At in the present day’s share price of 331.5p that will price me £25,499, which is greater than my whole ISA allowance. Sadly, I can’t stretch to that.

Investing £5,000 would purchase me 1,508 shares for a forecast revenue of £196. It’s not as a lot as I hoped, however it ought to rise over time, particularly if I add to my stake later. I’ll purchase Tesco when I’ve the money.