3 Reasons That Make J Sainsbury plc A Fantastic Stock Buy

Royston Wild looks at why J Sainsbury plc (LON: SBRY) provides a great investment opportunity.

| 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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

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 J Sainsbury (LSE: SBRY) (NASDAQOTH: JSAIY.US) is a shrewd stock pick for those seeking bumper returns.

Tills keep on ringing

The storming success of budget retailers such as Lidl, as well as high-end grocery specialists including Waitrose, continues to eat away at the mid-level supermarket space. But while the likes of Tesco and Wm. Morrison keep on struggling with their sales resuscitation plans, Sainsbury’s continues to thrive despite this aggressive fragmentation of the UK grocery sector.

Indeed, latest statistics from researcher Kantar Worldpanel revealed that Sainsbury’s revenues advanced 2.7% during the 12 weeks to February 2, outpacing growth of 2.4% for the wider grocery market. This also pushed the firm’s market share to 17.1%, up from 17% during the same 2013 period and to within a hair’s breadth of Asda — Britain’s second-biggest supermarket — which holds a 17.3% share.

Multi-pronged approach paying dividends

Sainsbury’s devotion to developing the quality and image of its own-brand products — in particular its Taste the Difference range, which saw sales rise 10% during quarter three — is helping to defend its place in the market while its peers continue to toil.

Most notably, however, Sainsbury’s has aggressively ramped up its exposure to red-hot growth sectors. The company is seeing sales at its convenience outlets rise 18% per year, and opened 19 smaller stores during the third quarter to facilitate further growth. Sainsbury’s is also reporting solid expansion of around 10% per annum for its online business, widely identified as the next hot growth area for Britain’s retailers.

A dependable pick at great prices

Sainsbury’s has been a reliable stock for both growth and income investors for many years now, and City brokers expect the supermarket to continue churning out decent returns well into the future.

Forecasters anticipate earnings to rise 5% in the year concluding March 2014, with advances of 6% and 5% expected in the following two years. These projections push the P/E rating from 10.8 for the current year to 10.2 in 2015 and 9.8 in 2016, moving below the value threshold of 10.

And the company is also expected to keep its impressive, multi-year run of dividend increases rolling during the period — a 5.4% rise to 17.6p per share is expected this year, and which is predicted to rise to 18.2p next year and to 18.7p in 2016. Such prospective payments carry mammoth yields of 5%, 5.2% and 5.3% respectively, easily surpassing the 3.2% FTSE 100 forward average.

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.

> Royston does not own shares in any of the companies mentioned in this article. The Motley Fool owns shares in Tesco and has recommended shares in Morrisons.

More on Investing Articles

Young black man looking at phone while on the London Overground
Investing Articles

1 delicious penny stock I reckon can deliver juicy returns and growth

This food delivery penny stock has experienced a surge in performance and uptake recently. Our writer is excited by its…

Read more »

Investing Articles

If I’d bought Rolls-Royce shares the day Tufan Erginbilgiç joined here’s what I’d have now

Harvey Jones is startled by just how fast the Rolls-Royce share price has risen since its transformative CEO took over.…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

How much do I need to invest in Lloyds shares to earn income of £1,000 a year?

Harvey Jones is getting income and growth from his Lloyds shares but wished he'd bought more of them. So he's…

Read more »

Illustration of flames over a black background
Investing Articles

Down 75%! Will the Saga share price ever be loved again?

The last few years have been incredibly difficult for those watching the Saga share price. But what does the future…

Read more »

Investing Articles

What kind of return could I expect by investing £100 monthly in a Stocks and Shares ISA?

Using a Stocks and Shares ISA to avoid capital gains tax could grow a £100 monthly investment into a second…

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

Can strong operational momentum keep the Informa share price rising?

FTSE 100 company Informa has been performing well, but this may be just the beginning of a multi-year trend for…

Read more »

Market Movers

What’s going on with the Britvic share price?

Jon Smith flags up why Britvic's share price is surging on Friday, but believes that the company is in a…

Read more »

Cheerful young businesspeople with laptop working in office
Dividend Shares

2 super-cheap passive income shares I’m eyeing up right now

Jon Smith discusses two of his favourite passive income shares in the banking and property sectors, both featuring yields above…

Read more »