The FTSE 100 contains plenty of thoroughbreds, but not all of them catch the eye. Some surprise us all by making a late dash for the line and ending up among the winners. One such dark horse is J Sainsbury (LSE: SBRY). It’s usually in the shadow of firm favourite Tesco, yet lately it’s been on a gallop.
The Sainsbury’s share price has surged 44% in the last six months, with its charge starting around 9 April, when Donald Trump’s tariff pause triggered a global stock market rally.
Over 12 months, it’s up 25%, and over three years, it’s gained almost 90%. I didn’t see that coming, having placed my bets elsewhere.
I’ve inspected this stock many times over the years, usually seeing it as more of a steady income stock than a growth play. It often yielded 4% or 5%, which tempted me, but the grocery trade is fiercely competitive and Tesco seemed far ahead in the field. Back then I thought Sainsbury’s would struggle to keep pace. How wrong I was.
Sainsbury’s shares and sales jump
Latest Worldpanel data shows supermarket sales were healthy in the 12 weeks to 7 September as shoppers stocked up on back-to-school basics and own-brand ranges.
Sales at Sainsbury’s rose 5.4%, giving it 15.1% of the overall market. However, it trailed Tesco, where sales jumped 7.7%, lifting its market share to 28.4%.
Sales at Ocado Group and Lidl both gained over 11%, while Asda lost ground. The problem now is that Asda’s trying to recapture lost ground by launching yet another sector price war at a time when margins are already razor-thin.
The cost-of-living crisis has left shoppers more price-sensitive than ever, as inflation remains sticky. Sainsbury’s faces higher wage costs after April’s rise in employer’s National Insurance contributions and a 6.7% hike to the Minimum Wage. It employs around 150,000 staff, so those extra costs soon add up. This is an issue across this grocery sector.
Dividend growth disappoints
Sainsbury’s’ trailing yield is 4.1% today, which is pretty good given how the share price has raced ahead. But its dividend record isn’t exactly sparkling. The 2025 payout rose 3.8% to 13.6p, but was flat at 13.1p for the previous two years. Over the past decade, the compound annual growth rate’s a measly 0.3%, with three dividend cuts along the way.
Consensus forecasts don’t inspire either, with analysts producing a one-year target price of 327p, roughly 3% below current levels. While forecasts can’t be relied upon, that suggests the easy gains may have been made.
A steady long-term runner
At a price-to-earnings ratio of 14.5, Sainsbury’s isn’t expensive. Yet after such a strong run, I think the pace might slow. Investors seeking diversification could still consider buying for the long term, particularly if there’s a dip. A stronger economy, lower interest rates and happier shoppers would all help but, for now, I suspect the race may be getting a little sticky.
Still, for a stock I’d once written off as a FTSE 100 also-ran, Sainsbury’s has shown it can move when it wants to.
