3 Reasons To Stick Tesco PLC In Your Trolley

Royston Wild looks at why Tesco PLC (LON: TSCO) could prove a shrewd investment.

| 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.

Tesco

In recent days I have looked at why I believe Tesco (LSE: TSCO) (NASDAQOTH: TSCDY.US) is at risk of a heavy collapse (the original article can be viewed here).

But, of course, the world of investing is never black-and-white business — it take a confluence of views to make a market, and the actual stock price is the only indisputable factor therein. With this in mind I have laid out the key factors that could, in fact, make Tesco a savvy stock selection.

Online market ripe with opportunity

Tesco has been operating in the internet marketplace for almost two decades, and with sales of over £2.5bn in fiscal 2013 alone the company knows the importance of bolstering its multichannel sales approach.

The retailer saw internet sales leap 13% during February-August, and is rolling out a number of initiatives to stay ahead of the pack in this increasingly competitive market. From slashing delivery charges and increasing the number of its Click & Collect depots, through to more revolutionary measures like permitting customers to scan and pay for products using their mobile phones, the company is pulling out all the stops to keep online growth galloping along.

More international withdrawals imminent

Without doubt Tesco’s expansion plans in foreign climes have proved nothing short of a disaster, and the firm continues to witness prolonged weakness in these markets. In Asia, like-for-like sales slipped 5.1% during September-November, while in Europe underlying revenues dipped 4%.

So news that the company is planning to follow up scalebacks in Japan, the United States and China with restructuring in Turkey should be music to the ears of investors. Tesco is apparently considering merging its assets with those of Turkish chain Migros, allowing the supermarket to further cut its exposure to underperforming geographies and boost its fresh UK-centric approach.

Dividends expected to head higher

Tesco has been forced to curtail its progressive dividend policy due to the onset of heavy earnings pressure. And the company is expected to keep the full-year dividend on hold for the years concluding February 2014 and 2015, at 14.76p per share, a scenario which would represent four straight years of no dividend growth.

However, the supermarket is anticipated to get dividends rolling again in 2016 with a 3% hike to 15.2p, in line with a return to earnings growth.

And although the retailer is expected to keep dividends on hold in the immediate future, yields through fiscal 2015 still register at a respectable 4.5%, comfortably ahead of the 3.1% FTSE 100 forward average. And 2016’s anticipated dividend uptick takes this to 4.6%.

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 Tesco. The Motley Fool owns shares in Tesco.

More on Investing Articles

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

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

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »