£10,000 invested in Sainsbury’s shares 2 years ago is now worth…

How have Sainsbury’s shares performed over the last two years? Are they worth considering today? Our writer gives his take on both questions.

| 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.

Image source: Getty Images

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.

Are defensive shares back on the menu? With economic projections looking gloomy and talk of a recession not far from people’s lips, companies with products folk buy through thick and thin might outperform. And even better if they offer a decent dividend along with the main course. Shares that might fit the bill include the nation’s second biggest supermarket, Sainsbury’s (LSE: SAIN). 

A £10k stake

Recent performance from the shares has been mediocre. A stake bought two years ago is only up 2.7% in value. I could have earned more through a savings account. Tesco is up 50% by comparison. It’s not been a great time for existing Sainsbury’s shareholders but it could mean a buying opportunity. 

Created with Highcharts 11.4.3J Sainsbury Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Then there is the question of dividends. Sainsbury’s pays a 5.11% yield, going from the last 12 months, one of the higher payers on the FTSE 100. It’s no flash in the pan, either. A dividend has been paid every year since 2007. Such a weighty payout can make a static share price less of an issue. 

Should you invest £1,000 in Sainsbury's right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Sainsbury's made the list?

See the 6 stocks

That 1.7% increase over two years becomes 13.96% when looking at total return (dividends reinvested). A £10,000 stake turns into £11,396, which is the attraction of this kind of dividend stock.

Sainsbury’s is coming off a “best ever Christmas” too. The festive period is a busy one for the big shops and CEO Simon Roberts was happy to announce winning “market share for the fifth consecutive Christmas”. This is great stuff in such a competitive sector. With budget options like Lidl, Aldi, or even Tesco snapping at the heels at one end, and prestige supermarkets like Waitrose and Marks and Spencer at the other, it’s a very good sign that Sainsbury’s is holding its ground in the middle. 

A squeeze

The big news Sainsbury’s is grappling with is, of course, the bump in Employer’s National Insurance. This cost affects almost all companies, but it disproportionately affects supermarkets where the twin issues of wafer-thin margins and a large workforce put the squeeze on at both ends. 

Management has mooted a £148m tax bill against net income of around £1bn. I doubt many other firms will be dealing with such a large slice taken out of their profits. Investors aren’t too pleased either – the shares dropped like a stone after the Budget and are still 13% down as I write.

The response has been to axe 3,000 jobs, including 20% of senior management, along with closing its in-store cafes. That might help the bottom line a bit but cutting services is not what I’m hoping to see, not to mention the human cost of so many people being put out of work. 

That’s probably the key question when it comes to my own decision. I like the defensive properties of the supermarket sector – I have some exposure already – and I suspect it will be a strong performer in a seemingly grim economic period. But I don’t think there’s enough in Sainsbury’s for me to buy in today.

Should you invest £1,000 in Sainsbury's right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Sainsbury's made the list?

See the 6 stocks

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.

John Fieldsend has positions in Tesco Plc. The Motley Fool UK has recommended J Sainsbury Plc and Tesco Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

We think earning passive income has never been easier

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Investing Articles

Last week, Rolls-Royce shares were the most popular on this investor platform. But there’s a catch!

Those using the Hargreaves Lansdown website bought more Rolls-Royce shares than any other UK stock last week. But this isn’t…

Read more »

Investing Articles

Here’s how to start investing with £500 as the stock market tumbles

Christopher Ruane reckons a rocky stock market could throw up some bargains, potentially making it a good moment to start…

Read more »

Investing Articles

Down 44% this year, could the Aston Martin share price bounce back?

The Aston Martin share price is in pennies and barely a 10th of what it was five years ago. Could…

Read more »

Young female analyst working at her desk in the office
Dividend Shares

A 9.28% dividend yield? Here’s the forecast for HSBC in 2025 and beyond

Mark Hartley considers the long-term prospects of the UK's largest bank, examining the reasons behind its surging dividend yield and…

Read more »

Investing Articles

A rally could be coming for the UK stock market! Here’s how I aim to profit

Mark Hartley considers a strategy to profit from a potential UK market rally. Which stocks are best-positioned to sidestep the…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

Is the rare dip in this FTSE powerhouse’s share price just the right time for investors to consider buying it?

This FTSE 100 banking giant has seen its price tumble following the US tariffs news, but could the rare dip…

Read more »

Investing Articles

After an 18% fall, is Rolls-Royce’s share price now just too cheap for me to ignore?

Rolls-Royce’s share price was caught in the recent FTSE 100 sell-off. But now might be the time for me to…

Read more »

Investing Articles

11% yield! Could this UK stock  be a huge opportunity for investors targeting a second income?

An double-digit dividend yield could be second-income buying opportunity if the stock market is underestimating this UK translation company. 

Read more »