Zero-Hours Contracts Don’t Affect My Red Hot Tip: Wm. Morrison Supermarkets Plc

With various politicians, business leaders and media commentators giving their views on zero hours contracts, Wm. Morrison Supermarkets plc (LON: MRW) remains unaffected as a ‘star buy’.

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Zero-hours contracts have caused quite a stir of late. Indeed, it seems as though every time I turn on the news or open a newspaper, there is yet more discussion of such contracts.

Of course, the Labour party is drawing the battle lines ahead of the 2015 general election and is challenging the government to ban them. Vince Cable seems to believe that they are not very good for employees but has stopped short of calling for their outright ban.

On the flip side, the CBI has declared that half a million people on zero-hours contracts would be unemployed if they weren’t on them. Indeed, this point is rather topical in itself, with the Bank of England now setting itself some kind of ’employment target’. Perhaps this number should be revisited in light of the widespread use of zero hours contracts, what with over a million people in the UK now said to be on one?

As you would expect, zero-hours contracts are used in a variety of industries including charities, hospitality, education and retailers. There is, though, one sector that does not use them: supermarkets.

Instead, they prefer to precision-plan their staff requirements in advance and do not need to utilise employment practices that, according to many, hark back to the Victorian era.

Anyway, supermarkets are not going to be at the sharp end of this discussion. Among them is Wm. Morrison Supermarkets  (LSE: MRW) (NASDAQOTH: MRWSY.US), which I believe is a screaming ‘buy’.

Not only does it have some potentially positive news flow to come over the next couple of years in the shape of an online offering and further expansion into the lucrative convenience store space, it offers a great yield at a low price.

Shares currently yield 4.1% from a dividend that is more than twice-covered. Furthermore, Morrisons trades on a price-to-earnings (P/E) ratio of just 10.8, which compares favourably to the FTSE 100 on 14.8 and to the food and drug retailers sector, which has a P/E of 11.1.

Overall, then, Morrisons has a great deal of potential and is especially attractive for income-seeking investors. Another company that provides a great yield is The Motley Fool’s Top Income Share for 2013.

I’d recommend you take a look at it by clicking here – it’s completely free and might just help you out more than you think, with interest rates now set to stay low for a good while yet.

> Peter owns shares in Morrisons. The Motley Fool has recommended shares in Morrisons.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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