The Tesco (LSE: TSCO) share price catches my eye right now. I think it looks good value. Not only that, but the UK’s largest grocer pays an attractive level of income too. I think this FTSE 100 income and growth stock would fit nicely inside a Stocks and Shares ISA.
I’ve been sceptical about investing in the supermarkets in the past, having swept them from my portfolio six or seven years ago. However, today I find the Tesco share price highly tempting.
Tesco had a good pandemic. It established itself as an essential service (as did all the supermarkets). As a result, nobody complained about its decision to carry on paying its dividend to investors throughout.
I’m watching the Tesco share price
This is one of the best reasons to invest in Tesco, as you currently get a forward yield of 4.4%. That looks highly attractive to me, as even the best instant access Cash ISAs pay just 0.4%. Better still, the dividend is covered 1.9 times earnings. While dividends are never guaranteed, this looks as solid as most on the FTSE 100.
However, there’s no guarantee Tesco will do as well once lockdowns are over. Grocery sales could slip as people eat out more and drink in pubs and restaurants rather than at home. The hospitality sector will be the big winner post lockdown, so supermarkets may be the losers. That may partly explain why the Tesco share price is down 10% in the last month.
On the plus side, sales of personal care products might rise, as people will want to look their best once we are released outdoors.
Right now, the Tesco share price trades at just 11.9 times earnings. I’d buy it with a long-term view, to retirement and beyond. I’m not worried how it will fare over the next six months, or so. In fact, I see the recent dip as a buying opportunity.
German threat fades
Lately, Tesco has been doing well against its peers. Its market share has just increased for the first time since December 2016. The increase was just 0.2 percentage points higher to 27.4%, but that’s still impressive in such a competitive market. Aldi and Lidl are both losing share, the first time that’s happened in a decade. This could spell more good news for the Tesco share price.
Tesco has also benefited from the switch to online grocery sales, where the German discounters have struggled to compete. Of course, demand for home deliveries could fall once the latest lockdown is over, but more people have got into the habit of shopping online and it could stick. Sales at Tesco Express stores have also been healthy.
Tesco is in a much better position than when I swept it out of my portfolio in the disastrous days of former CEO Philip Clarke. I’d buy it today in an ISA. After seven or eight years in the doldrums, I think there’s scope for the Tesco share price to deliver some growth.
