A 4.5% Dividend Too Steady To Miss

Perhaps Morrisons is a good buy at the moment, but they have moved away from the original Yorkshire style philosophy that Ken Morrison espoused. They are not now so financially conservative as they used to be. Also, Ken himself has sold nearly all his shares in them and so gives me the impression that he does not like the new management.
I have worked for them in their computer department which is very new to the business and who seem to be taking a lot of money with no real obvious rewards coming from it. However, I would agree that their 'fresh' approach gives them an edge, but how long before the others do something similar?

Mull

Despite the bad news generated by the market around these three companies, all of Morrison's, Sainsbury and Tesco's are good companies that are down more due to market sentiment regarding their sector than any real disaster in terms of the fundamentals of each.

Take Sainsbury as an example. In the last 4-5 years the share price has halved despite the fact that the company has put up good results every year in a challenging austerity consumer market. Morrison the same, although their share price, until hit by the "Tesco effect" from January, had held up quite well. Tesco is the drag on the sector, because of its lagging UK performance, however, it also continues to increase its profits if you look at the bigger picture of its international exposure. For those that think that Tesco is suffering purely because of its UK woes you really need to think again and consider that Sainsbury, a UK based operation, has actually suffered a worse share price performance despite outperforming Tesco in the UK over the last 3 years!

It really is all about sentiment. The UK retailing sector is in the doghouse with the market and until that changes its difficult to see an upside for these companies. I would suggest monitoring the long term monthly and weekly charts and look for indicator (macD/RSI, etc)/MA crossovers on these for a sentiment change before buying. They are cheap and unloved at the moment, but could still get cheaper.

I notice that whenever we discuss supermarket shares (the recent Tesco collywobbles being an example) we all weigh in with our faves and hates, whether we like or loathe shopping in SBRY, TSCO etc - forgetting that it's really about the stock: market dominance, profit and loss, debt (particularly), share value, innovative management, scope for future growth, expansion overseas etc. Basically each of them has problems of supply and service, and strategic overreach.
In fact I wonder if they all just need better software and more modern store management. And improved home delivery services.

jaizan - But all the major supermarkets are rationing service and poor at restocking! They'll still all make money, because petrol prices force people to shop nearby, queue or no queue.
Tesco at 300p are excellent value at a P/E of 8.5. Their future growth story is well-hedged (UK/emerging) their property portfolio is strong, the 4.9% divi is well-covered at 2.5x, and they claim to be addressing the management/strategic blips that brought them down to 300p.

SBRY have a superb divi, also pretty well covered at 1.7x, a juicy 5.6% divi - excellent in these uncertain times. But growth has been pootling along sideways for years, and what's going to change basically for UK-orientated supermarkets in a UK consumer recession?

Why are we buying the UK retail sector anyway? For total return (one, three, five years) we'd have been be better off buying well-managed funds like the Unicorn Income or the Edinburgh Investment Trust - their performance far outclasses either TSCO or SBRY, and their divi of 4.7%, while not massive, isn't bad either.

DoI - I hold TSCO, EDIN. I may buy some SBRY, Unicorn Inc.