3 Great Reasons Why Tesco Plc Is Set To Take Off

Royston Wild looks at the major share price drivers for Tesco plc (LON: TSCO).

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Today I am looking at why I believe Tesco (LSE: TSCO) (NASDAQOTH: TSCDY.US) is a stunning stock selection if you are looking to profit from an exciting turnaround story.

International business continues to stride higher

Having shaken off the shackles of its failed Fresh and Easy venture in the US, Tesco is in prime position to latch onto the fantastic growth potential offered up by international markets, particularly in Asia. Indeed, revenues in the emerging market hotspot of Asia leapt 10.9% in the first quarter.

The company drew headlines this month when news broke that it was in talks with China Resources Enterprise — the nation’s largest retail chain — to merge its 131 stores with the Chinese firm’s 3,000 hypermarkets and supermarkets. Tesco has experienced disappointment in not being able to crack the country as quickly as it had expected, so the move will enable it to maintain a presence there whilst cutting costs as it plans its next move.

Excellent growth in convenience and online

Tesco has been one of the grocery industry’s pioneers in the realm of online shopping, and the firm continues to pull up trees in this most lucrative of retail channels — UK sales here jumped 12.8% in 2012 to more than £2bn.

Performance here continues to outperform that of the wider grocery market, and the firm plans to bolster its presence here by doubling the number of ‘Click and Collect’ collection locations to 300 by the end of the year. Tesco is betting heavily in this area to deliver future growth, and is also due to open its sixth online only store in the coming months.

As well, Tesco is also benefitting from changing consumer trends which has seen smaller, more regular shopping trips become more popular at the expense of large weekly trips. The business opened 140 Express and 26 One Stop stores last year and has said that, of the 1.4m square feet that it plans to add to its total retail space this year, a vast proportion will be dedicated to unveiling new convenience shops.

Bang some bumper dividends in your basket

Although Tesco kept the dividend on hold at 14.76p last year, the supermarket has a stunning reputation of offering above-average payout yields and on-year dividend increases. And City analysts expect dividends to resume an upward path over the next two years — full-year dividends of 15.12p and 15.93p are anticipated for fiscal 2014 and 2015 respectively.

Payments for these years are currently 4.1% and 4.3%, compared with the prospective 3.1% FTSE 100 average.

And if you are looking for other excellent stocks to rev up your investment income, you should check out this brand new and exclusive report which singles out even more FTSE 100 winners to really jump start your investment income.

Our “5 Dividend Winners To Retire On” wealth report highlights a selection of incredible stocks with an excellent record of providing juicy shareholder returns. Among our picks are top retail, pharmaceutical and utilities plays which we are convinced should continue to provide red-hot dividends. Click here to download the report — it’s 100% free and comes with no further obligation.

> Royston does not own shares in Tesco. The Motley Fool owns shares in Tesco.

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.

More on Investing Articles

Middle-aged black male working at home desk
Investing Articles

Are these top-traded FTSE 100 shares the best to buy for 2024?

The market has disagreed with me pretty much all year on the best buys among FTSE 100 shares. But, are…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

My five favourite forms of passive income

I've been looking for ways to pump up my passive income, so I can retire richer. But which of these…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing Articles

What’s the FTSE 100’s best 10% dividend yield?

Depressed prices have thrown up some golden opportunities on the FTSE 100. Which of these 10%-yielding Footsie stocks should I…

Read more »

Two white male workmen working on site at an oil rig
Investing Articles

BP shares look dirt cheap

Are BP shares a brilliant bargain? The financials look excellent and it’s hard not to call them anything other than…

Read more »

Mindful young woman breathing out with closed eyes, calming down in stressful situation, working on computer in modern kitchen.
Investing Articles

My 12 fears for the stock market in 2024

After a terrific year for global stock markets in 2023, what can I look forward to in 2024? As a…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

2 income shares for bumper dividends in 2024

I own these two income shares for their outstanding ability to deliver billions of pounds of cash dividends each year…

Read more »

Investing Articles

Could the IAG share price hit £2.11 in 2024?

According to analysts, the IAG share price could be headed for £2.11. But Stephen Wright wonders whether the stock is…

Read more »

Businessman use electronic pen writing rising colorful graph from 2023 to 2024 year of business planning and stock investment growth concept.
Investing Articles

1 hot UK growth stock I’m buying right now

I've more than doubled my money on this UK growth stock. But with a 948% boost to earnings, I think…

Read more »