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Looking for a rising passive income in retirement? I’d check out the Sainsbury’s share price

The Sainsbury’s share price has looked to be past its sell-by date for years. It’s at least five years since I swept the UK’s second-biggest supermarket from my watchlist. Subsequent performance gives me little to regret. Incredibly, the stock trades 40% lower than it did 10 years ago.

But this morning, J Sainsbury (LSE: SBRY) served up a healthy 8.2% rise in first-quarter sales, driven by pandemic stockpiling. Online sales doubled as housebound customers scrambled to book home delivery slots. 

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Sainsbury’s reported a £500m “profit impact” from Covid-19 overall, with clothing sales down 26.7% and fuel down 56.1%, and staff safety measures adding to costs. However, this was broadly offset by business rates relief and stronger grocery sales.

The Sainsbury’s share price has dipped

Excitement today centred around Argos. Sales rose 10.7% as locked-down Britons snapped up laptops, computer games, baking equipment and home office furniture. Former CEO Mike Coupe’s acquisition looks to be paying off.

Yet after an early jump, the Sainsbury’s share price retreated and is down around 1.5% at time of writing. Investors clearly anticipated the jump in online grocery shopping. The challenge now is to hold on to its new shoppers, amid intense competition.

At the start of 2018, Sainsbury’s market share stood at 16.2%, according to Kantar Worldpanel. It has since slid to 14.9%. The decline is inexorable, even if growth rates at discounters Aldi and Lidl are slowing. Margins are tight and Tesco‘s decision to price-match Aldi could up the pressure on Sainsbury’s.

Investors would now like to see a bounce-back in general merchandise sales, as the lockdown is eased. This is still a strong start for new boss Simon Roberts, the worry now is that customers will feel squeezed if unemployment rises sharply after the furlough scheme ends.

Roberts was being cautious today, warning of the positive impact recent sunny weather has had on sales at the FTSE 100 company, which may not last. The long-term impact of Covid-19 on sales and costs is impossible to predict, although underlying profit is expected to be the same as last year.

The share price looks cheap, judged by conventional metrics. Right now, it trades at just 11.2 times forward earnings.

Top FTSE 100 dividend stock

There is no dividend, remember. This was suspended in April, even though rival Tesco has stood by its payout. Interestingly, recent Sainsbury’s share price performance has been marginally better. It is up 7.5% in the last month while Tesco is down 2%. I suspect investors are indulging in a bit of profit-taking today, because these are good results.

The dividend will return at some point. Right now, analysts are forecasting a yield of 4.8% in 2021, and 5.1% in 2022. That is the main reason to buy into the Sainsbury’s share price – for income. Share price growth has been non-existent for years.

At today’s low value, right now could still prove a good entry point for long-sighted income seekers.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesco. 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.