But after a run like that, is the stock still worth buying today? Or has the easy money been made?

The competitive moat’s widening

Tesco’s latest quarterly trading update shows a business still firmly in the driving seat. Group sales came in at £16.8bn, with UK like-for-like sales up 1.8% on top of an exceptionally strong prior year period. Two-year like-for-like growth in the UK stands at an impressive 6.9%, which tells a more complete story of the consistent momentum being built under CEO Ken Murphy.

Online growth continues to impress too, with sales up 8.9% in the UK. And Tesco’s insurance and mobile services are growing fast, with insurance policies in force now up 15% to 2.7 million customers.

It seems that Tesco’s quietly evolving from a grocer into a consumer ecosystem, and that has meaningful implications for the long-term margin trajectory. Even in the near-term, management’s reiterated its underlying operating profit guidance of £3bn-£3.3bn. And analysts have taken note.

The team at Morgan Stanley issued an Overweight rating with a 560p share price target – around 18.9% higher than where Tesco shares are trading today. And looking across the full spectrum of price forecasts, the mood from institutional experts seems to be pretty bullish.

So with plenty of wind in Tesco’s sails, is this a cheap stock worth considering today?

What could go wrong?

At a price-to-earnings ratio of around 17, Tesco’s far from a deep value play. And after already doubling in five years, most of the re-rating has seemingly already happened. That doesn’t mean there isn’t more money to be made, but it does suggest another doubling might be difficult to deliver without a significant expansion of profits.

Growing the bottom line’s certainly possible. But with fierce competition from discounters such as Aldi and Lidl, alongside incoming expected energy inflation, Tesco might be forced to cut prices to stay competitive, putting direct pressure on its already razor-thin margins.

Meanwhile, while most of Tesco’s operations are running smoothly, Booker Wholesale remains a bit of a pain. While far from disastrous, like-for-like sales fell 3.2% during the first quarter, partly reflecting a lower-margin contract exit and some unfortunate prior-year comparatives.

But with growing strain on the UK economy, particularly in the restaurant and food services sectors, this downward trajectory could prove persistent throughout the rest of 2026 and potentially beyond.

The bottom line

Tesco isn’t the bargain it once was, but it remains a high-quality, competitively-entrenched business that seems to be getting better every year.

That’s definitely the hallmark of a steady compounder. And while growth investors will likely be disappointed, patient investors looking for a more defensive business may want to consider inspecting this stock a bit closer.

Should you invest £5,000 in Tesco Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie 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 Tesco Plc made the list?

Zaven Boyrazian does not hold any positions in the companies mentioned.

The post From £5k to £12.4k! Is the current Tesco share price still a bargain? appeared first on The Twelfth Magpie.

But with the stock now trading around 470p, is there any meaningful growth potential left? Here’s what the City’s analysts think.

What the analysts are forecasting

Overall, the mood on Tesco is firmly positive. Sixteen analysts currently cover the stock, with 11 rating it a Buy or Outperform, four saying investors should Hold, and only one recommending to start taking profits.

And when looking at the latest share price forecasts, the outlook appears similarly bullish. The average consensus for Tesco is a share price target of 515p – around 10% higher than where the stock’s trading today. And when zooming in on individual projections, one analyst thinks the retailer could climb to as high as 550p, or a 17% return on investment.

To put those numbers into context, a £5,000 investment at today’s price could grow to around £5,500 if the consensus proves correct. Yet if the most optimistic analyst is right, then that same £5,000 climbs to around £5,850.

So now the question becomes, is this optimism well-founded?

Why analysts believe there’s more to come

The UK grocery market is quietly becoming a two-horse race, with Tesco and Sainsbury’s cementing their dominance as weaker mid-market players struggle.

Tesco’s decision to aggressively protect its price position against discounters such as Aldi and Lidl through its Clubcard loyalty scheme is seemingly working well. Like-for-like sales continue to grow, with Tesco’s market share now at its highest point in over a decade.

What’s more, this loyalty scheme has transformed into a genuine competitive moat. It generates a mountain of purchasing data that allows Tesco to personalise promotions more effectively than any competitor.

As a result, Tesco’s rising value perception in the eyes of customers keeps them coming back. And subsequently, the business is looking increasingly like a quality compounder for investors.

What could go wrong?

The biggest near-term concern is the UK consumer. Mortgage rates remain elevated, household budgets are still stretched, and any fresh economic shock could prompt shoppers to trade down more aggressively than Tesco can offset through discounted volume.

Competition from the discounters isn’t going away either. Aldi and Lidl are still significant threats, and opening stores at pace across the UK, particularly in catchment areas where Tesco’s historically been strong.

So far, Tesco’s proven itself resilient against such disruption. But if that changes, then after such a strong bull run, the share price could start to wobble as more investors begin taking profits.

Is now the right time to consider buying Tesco shares?

The business is operationally strong, cash generative, and rewarding shareholders with both a growing dividend and a buyback programme.

While I don’t think Tesco will be delivering any explosive gains, patient investors looking for a defensive shelter against wider stock market volatility may indeed want to take a closer look.

But it’s not the only opportunity I’ve got my eye on right now…

What income stock do we like better than Tesco Plc right now?

One of our Share Advisor analysts has just released a brand new stock report that we think is a must-read for any investor looking to try and generate potential income.

And the best bit is that you can see if for yourself, right now, absolutely free of charge!

No jargon. No hard sell. Just a clear look at an income share we think is worth your time.

Zaven Boyrazian does not hold any positions in the companies mentioned.

The post The Tesco share price has doubled in 5 years! Is it too late to buy? appeared first on The Twelfth Magpie.

Speaking of food bills, FTSE 100 supermarket shares are popular among many income investors. After all, we constantly need to buy groceries, no matter what’s happening with the economy. In theory, this gives these dividends a defensive quality.

As we all know, supermarkets use a pricing strategy to convince shoppers that £9.99 is somehow better value than £10 — despite the 1p difference!

Borrowing the same trick for a bit of fun then, how much passive income would £9,999 worth of Tesco (LSE:TSCO) shares generate by next Christmas?

Passive income potential

Tesco stock has been on a strong run. Indeed, anyone who invested five years ago would have already doubled their money, before dividends.

However, with the share price near a 13-year high, the dividend yield is not spectacularly high (though hardly paltry). It’s at 3.4% on a forward-looking basis.

If Tesco meets forecasts, this means investors should expect just over 21p per share between now and Christmas 2027.

This would include a 15.6p dividend for the current fiscal year (FY27), split between November 2026 and June 2027, and a further interim dividend of about 5.45p in November 2027.

Putting this together then, someone who invests £9,999 today would expect to receive roughly £450 in passive income over this period.

What could derail Tesco’s progress?

Of course, dividends are never ultimately assured. And if its share price struggles, Tesco might turn out to be a disappointing investment, even with dividends.

So, what could go wrong? Well, sales might come in lower than anticipated. This happened in Q1, when UK like-for-like sales growth of 1.8% failed to match market expectations (for about 2.3%). Volumes also slightly disappointed over Christmas.

Are weight-loss drugs like Mounjaro starting to take a bite out of supermarket volumes? After all, usage of these powerful GLP-1 medications have nearly tripled in the UK in just two years, with as many as 2m people now taking them.

According to Worldpanel by Numerator’s survey of 11,500 households, grocery bills fell by an average of £418 in the first year with one GLP-1 user in a household. So this could be a challenge moving forward.

These drugs are fundamentally disrupting how people engage with food and drink, with ripple effects already being felt across grocery and lifestyle, forcing brands and businesses to adapt at pace.
Chantel Kennaugh, Worldpanel

Also, food inflation is an ongoing risk to overall volume growth, as cash-strapped shoppers might further tighten the purse strings.

Basket reallocation

Given this, are the shares still worth considering? I think so, because for now at least, these drugs are expensive, leading some to quit after a few months. People then tend to revert back to older patterns of consumption.

Also, while GLP-1 users are cutting back on certain snacks, they’re also buying protein-rich foods, as well as mouthwash, chewing gum, and hair products to counter side effects. In other words, there’s basket reallocation.

With Tesco’s market share approaching 30%, and the shares trading reasonably, I think this supermarket stock is worth assessing more closely for a passive income portfolio.

What income stock do we like better than Tesco Plc right now?

One of our Share Advisor analysts has just released a brand new stock report that we think is a must-read for any investor looking to try and generate potential income.

And the best bit is that you can see if for yourself, right now, absolutely free of charge!

No jargon. No hard sell. Just a clear look at an income share we think is worth your time.

Ben McPoland has no position in any of the companies mentioned.

The post By Christmas 2027, £9,999 in Tesco shares could generate this much passive income… appeared first on The Twelfth Magpie.

CAPE stands for ‘cyclically adjusted price‑to‑earnings’ — basically, it’s a valuation metric that measures how over-hyped the market is. 

When stocks consistently grow for an extended period of time, traders and investors tend to get a bit carried away. As a result, markets get bloated — people start paying way too much for stocks based on pure speculation, hope and FOMO (fear of missing out).

That creates an unsustainable environment and eventually, it all comes tumbling down. That’s what the Shiller CAPE tracks.

Currently, it’s sitting around 41.5 for the US S&P 500, way above the historical average of about 17. The ratio reached its all-time historical peak of 44.2 in December 1999 at the height of the dotcom bubble.

Now, it’s less than three points away from breaking that record. If you were there in 1999, then you know what comes next.

So what’s the good news?

A UK safe haven

UK shares have often traded at lower valuations than the US, which can provide some a ‘safe haven’ during a global financial crisis. Of course, they’re not immune to worldwide shocks but they can be more defensive.

When applying the Shiller CAPE ratio to the FTSE 100, it only sits at approximately 20.07.

That’s because sectors like energy, financials, and materials carry more weight in the FTSE 100 than in the S&P 500 (where tech dominates). Right now, AI is working really hard to replicate a dotcom scenario.

So what does this mean for investors?

Tracking defensibility

In the event of a market crash, the mitigating factors are relevant: oil prices, interest rates, credit stress. These will shape how a downturn plays out for UK stocks versus US tech‑heavy indices.

So for investors looking to safeguard their portfolios, it’s important to assess these impacts. Right now, one of the safest UK shares, in my opinion, is Tesco (LSE: TSCO).

Demand for groceries stays relatively steady even in a downturn, so its sales and cash flow are usually less cyclical than those of many other FTSE names. It also benefits from being the UK market leader, which gives it scale, brand strength, and pricing power.

Even though tough competition from Aldi and Lidl constantly pressures the retailer, it continues to match low prices. Still, if the economy weakens, tighter consumer spending could threaten profits.

Its 3% dividend yield isn’t spectacular but it’s very reliable, and recent share buybacks help support total returns when markets are volatile.

The main appeal isn’t rapid growth — it’s resilience, income, and everyday-necessity exposure. That’s exactly the kind of profile investors often want when protecting a portfolio from a possible market crash.

The bottom line

Just because one indicator is flashing red doesn’t guarantee a crash. The world today is very different to how it was in 1999, so a direct comparison isn’t necessarily accurate.

But as the saying goes: “If you fail to prepare, prepare to fail”.

It’s worth considering defensive options like Tesco, even if the short-term potential is weaker. In a worst-case scenario, it can also protect a portfolio against catastrophic losses.

For risk-averse investors like myself, financial safety is the number one priority. That’s where defensive shares win.

Should you invest £5,000 in Tesco Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie 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 Tesco Plc made the list?

Mark Hartley owns shares in Tesco.

The post Near record highs, this key indicator says the stock market could be moments away from a crash appeared first on The Twelfth Magpie.

So far in 2026, the two giants have told very different stories. A £1,000 invested in Tesco at the start of the year is now worth around £1,055. But the same amount invested in Lloyds is now worth closer to £1,159.

So what’s driving that gap? And which one looks like the better investment from here?

Lloyds: a profit machine in full flow

Looking at the latest numbers, Lloyds’ pre-tax profits jumped 33% year-on-year to £2bn across the first quarter of 2026.

Net interest income grew 8% to £3.6bn, powered by a structural hedge that is now generating over £1.6bn every single quarter. And with a return on tangible equity of 17% coming in above management’s 16% target, leadership comfortably upgraded its full-year interest income outlook to £14.9bn.

In the words of CEO Charlie Nunn:

“In the first quarter of 2026, the Group delivered sustained strength in financial performance, growing our income, maintaining our cost discipline and delivering strong profitability.”

But of course, there are still some lingering risks for investors to watch carefully. The FCA’s motor finance redress scheme continues to play out, presenting a significant future drag on profits. And while elevated interest rates have helped the bank, this tailwind likely won’t last forever.

Tesco: steady, strong, and still going

Tesco’s first quarter of its 2027 fiscal year (ending in February) might look quieter on the surface, but the underlying resilience is compelling.

Group sales reached £16.8bn with UK like-for-like sales up 1.8% on top of an already exceptional prior year. Online sales grew 8.9%, while Tesco’s Finest premium product range delivered a 9% sales uplift.

As such, the group’s full-year underlying operating profit guidance was maintained at a range of £3bn-£3.3bn, with free cash flow expected to land between £1.5bn and £2bn.

That’s obviously positive news. But investors’ sentiment was ultimately dampened by continued soft performance in its Booker wholesale division. With a key national customer going elsewhere, like-for-like sales were dragged down by 3.2%. That’s not disastrous, but it does spark some understandable concern.

Which one wins from here?

Regardless of what the share price is doing, both businesses are performing well and backing their guidance with real cash generation.

Lloyds has delivered the bigger gain so far in 2026, and its structural hedge provides genuine visibility on earnings for years ahead. Tesco meanwhile, is the quieter compounder with a near-unassailable position in UK grocery backed by growing online and premium ranges.

As for which is the better investment, that ultimately depends on the goal. For income investors, Lloyds offers a compelling yield, while Tesco might have more appeal for investors looking for a defensive compounder against wider stock market volatility.

Personally, I think both businesses deserve a closer look.

Should you invest £5,000 in Lloyds Banking Group Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie 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 Lloyds Banking Group Plc made the list?

Zaven Boyrazian does not hold any positions in the companies mentioned.

The post Tesco vs Lloyds shares: which FTSE 100 stock is dominating in 2026? appeared first on The Twelfth Magpie.

While politicians discovered that job security isn’t guaranteed, Tesco (LSE: TSCO) quietly paid its final dividend on 26 June. It tends to do that regardless of who is measuring the curtains in Downing Street.

Passive income

That reliability is the whole point of passive income investing. A dividend arrives whether markets are euphoric or despondent, and reinvesting it buys more shares, which generate more dividends in turn. 

The compounding process is slow, unglamorous, and devastatingly effective. The common mistake is to try and speed things along by looking for very high yields.

That can be risky — a 9% payout is often a warning sign of a cut to come. A 3%–4% yield growing at 7% a year is often the better long-term income engine.

Enter Tesco, with its 3.4% dividend yield. Could that be worth considering for income investors seeking stocks to think about buying in July?

What diligent investors will notice about Tesco

Tesco is the UK’s largest grocer, and its market share is now at its highest level in over a decade. And the firm’s scale is its big advantage.

More stores and the chance to reach more customers give the company buying power with suppliers. Smaller rivals just don’t match up.

The Clubcard scheme also gives the firm better data than rivals. Think about how Meta Platforms knows which ads you click on – but with food.

The Aldi price match scheme makes Tesco competitive against the toughest rivals. And people keep coming through its doors in recessions, pandemics, and everything else.

What about margins?

Retail is notorious for tight margins. This is especially true of groceries, where consumer choices are mostly driven by price and value.

It makes inflation a real challenge. And raising prices to offset cost increases risks alienating customers who can easily go elsewhere. 

One strategy for dealing with this is to try and offset higher costs with growth elsewhere. And Tesco has done this very effectively recently.

A combination of 4.3% revenue growth and a £1.45bn share buyback programme have boosted earnings per share. And there’s more to come on the buyback front.

 A dividend opportunity?

Tesco’s shareholder returns – both dividends and buybacks – are covered by the firm’s free cash flows. That’s a very positive sign.

At around 459p, a £10,000 investment would buy roughly 2,178 shares. That’s about £340 a year in dividends at the forecast payout. 

The real case for buying the stock has nothing to do with inflation, interest rates, or whoever ends up in No. 10. It rests on the firm’s key competitive strengths. 

Those include durable scale, dependable cash generation, and a management team committed to returning cash to investors. That was true last July and it’ll likely be true next year.

That’s exactly what dividend investors want from stocks. And it’s why right now looks to me like as good a moment as any to think about buying.

That being said, it’s not the only name worth considering. As we head into July, I’ve got a few growth and income stocks on my radar.

What income stock do we like better than Tesco Plc right now?

One of our Share Advisor analysts has just released a brand new stock report that we think is a must-read for any investor looking to try and generate potential income.

And the best bit is that you can see if for yourself, right now, absolutely free of charge!

No jargon. No hard sell. Just a clear look at an income share we think is worth your time.

Stephen Wright does not own shares in any of the companies mentioned.

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Strongly outperforming its benchmark index

In fact, over the past five years, the Tesco share price is up by 95%. During the same period, the FTSE 100 index of leading British shares (of which Tesco is a constituent member) is up 46%.

So Tesco’s share price gain during that period is slightly better than double that of the index. In financial terms, that means that £10,000 invested in the grocer five years ago (in June 2021) ought now to be worth around £19,500.

Attractive dividend opportunity

On top of that, a long-term shareholder would have benefited from passive income streams thanks to the dividends paid by Tesco. Currently, the yield is 3.3%. That is above the FTSE 100 average of 3.1% — not dramatically above it, but still above. So while I do not regard that as extremely appealing, it is still attractive nonetheless.

Remember though, that that dividend yield is for someone buying Tesco shares today – and the price has almost doubled in five years. So someone who invested five years back would now be yielding roughly 6.4%.

That seems like a very attractive dividend to me for a blue-chip business of Tesco’s calibre. It also means that, on top of the capital gains, someone who put £10k into Tesco shares five years ago would since have earned around £2,765 in dividends from them.

The dividend has grown strongly over the past several years and could keep doing so if Tesco’s business performance is good.

Is there an opportunity here now?

Hindsight is a wonderful thing. Clearly, buying at the Tesco share price five years ago and holding the shares until now would have turned out to be a lucrative move.

But I did not do that. What about now? Could it make sense for me to add the share to my portfolio at the current price?

As I see it, Tesco’s strengths as a business now are similar to what they were five years ago, such as its leading position in the UK market and a large base of shoppers and loyalty card users.

But what has changed is the valuation. Earnings have grown: last year’s diluted earnings per share were around 29% higher than they had been five years ago. But that growth is nothing like the growth seen in the Tesco share price. That means the price-to-earnings (P/E) ratio is now higher than it used to be.   

I don’t think this looks cheap now

With a P/E ratio of 16, I do not see Tesco as a bargain. In fact, at that valuation, I do not even think the share is attractively priced. After all, this is a mature business in a mature industry that is bedevilled by low profit margins due to intense competition around price.

So for now, I will not be investing. Fortunately, the UK stock market has other retail and consumer goods shares I think currently offer much better value.

Should you invest £5,000 in Tesco Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie 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 Tesco Plc made the list?

Christopher Ruane does not hold any positions in the companies mentioned.

The post Here’s what a surging Tesco share price has done to £10,000 invested 5 years ago appeared first on The Twelfth Magpie.

But in recent days the price has wobbled. A trading update this week did not excite the City.

A solid business, run well

The investment case for Tesco is pretty straightforward, as I see it.

Groceries are a large market and, because people always need to eat, that is unlikely to change.

As the country’s biggest supermarket by some distance, Tesco has economies of scale. It benefits from a strong brand, large retail estate, well-established digital business, and its Clubcard loyalty scheme with over 20m members.

All of that is well and good but arguably Tesco’s strength is also its weakness.

Why? It has a solid business in an industry with low profit margins and modest growth prospects. As the market leader, it will struggle to grow by gaining market share like smaller, nimbler rivals can. Tesco’s growth prospects in the medium-term look mediocre at best to me.

So when I think about Tesco shares, I tend to believe they merit a valuation suitable for a mature, low-margin business that is attractive but with limited scope for growth.

I think share price momentum is fading

Set that against how the share price has soared in recent years and it can be hard to square the two.

One explanation is that investors saw Tesco as undervalued before, appreciate its defensive qualities, and have rewarded a strategic refocus on the core business in recent years, with the firm’s former global ambitions now stretching no further than Europe.

But the share price rise means that Tesco shares now sell for 17 times earnings. That looks expensive to me.

To justify a higher share price than that on a sustained basis, I think Tesco needs a more compelling growth story.

This week’s trading announcement, though, was fairly humdrum stuff. Like-for-like sales (excluding VAT and fuel) across the group in the first quarter were 1% higher than in the same period last year.

The Booker wholesale operation fared worse, losing sales, but while the grocery operation grew faster than that 1% headline for the whole company, its growth rate was still under 2%.

I see no compelling reason to buy now

I do not think that is a bad number. In fact, it is more or less what I would expect from a mature market leader in a mature category that has broadly stable demand.

But therein lies the rub as an investor. Priced at an attractive level – as it was five years back – that sort of stable company can be very attractive to me.

The costlier it gets, though, the less compelling I find it.

I see no specific reason to expect strong share price growth in coming years. Tesco’s yield of 3.3% — while slightly above the FTSE 100 average – is comparable to or even worse than many other businesses I think offer stronger growth potential.

So, I will not be buying any Tesco shares for my portfolio.

Should you invest £5,000 in Tesco Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie 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 Tesco Plc made the list?

Christopher Ruane does not hold any positions in the companies mentioned.

The post Are Tesco shares losing their momentum? appeared first on The Twelfth Magpie.

So, what’s happened? Tesco’s like-for-like takings in the three months to May were up just 1% year on year, excluding fuel. City analysts had expected them to rise 1.4%.

The thing is, I think things could get much tougher for the FTSE 100 company and its share price. Want to know why?

Disappointing Q1

Food retail is one of the most stable industries out there. And Tesco is the sector’s biggest player, with millions of loyal customers and incredible scale that keeps costs down. Analysts at RBC Capital have described the firm as the

Best-in-class player in the UK Food Retail space, with a strong business model and an experienced management team.

It’s quite possible you shop at Tesco in store or online yourself. I nipped into my local just this morning to pick up some basics. Yet, for all its qualities, Britain’s largest retailer remains at the mercy of the country’s ongoing cost-of-living crisis. And right now it’s being hit harder than analysts predicted.

Its Booker wholesale division was the worst performer in Q1, as the numbers above show. This reflected tough year-on-year comparatives and the exit of a lower-margin contract.

Yet fears over Tesco’s UK trading are the main issue. This is the engine room of the firm’s operation, accounting for roughly three-quarters of revenues. Like-for-like sales grew 1.8% in Q1, which was exactly half a percentage point below what analysts were expecting.

No room for error

In terms of Tesco’s shares, the problem is that they look pricey from an historical perspective. At 448p per share, they trade on a forward price-to-earnings (P/E) ratio of 15 times. That’s above the 10-year average of 11-12.

That’s not outrageously expensive, sure. But any share that trades above value needs to regularly hit broker forecasts at a minimum. That’s clearly not happened with Tesco today, hence its share price fall.

The problem is the sales could remain under pressure in the months ahead, leading to further disappointing trading statements. If so, a sharp re-rating of Tesco’s shares can be expected.

What could go wrong?

One danger is that consumers continue feeling the pinch as inflationary pressures grow. In this climate, too, Tesco’s will have limited scope to pass rising costs onto customers, impacting margins.

Finally, the recovery of rivals in the famously competitive food retail segment could affect Tesco’s sales. As those analysts at RBC Capital also mention,

Market share gains have moderated in recent periods, and we expect this trend to continue given competitors in the UK are starting to stabilise their volume losses.

I certainly won’t be taking a risk with Tesco’s shares today. And especially given the FTSE firm’s high market valuation.

Should you invest £5,000 in Tesco Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie 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 Tesco Plc made the list?

Royston Wild does not hold any positions in the companies mentioned.

The post Tesco’s share price drops 2% on Q1 trading miss. What’s gone wrong? appeared first on The Twelfth Magpie.

But first, I want to think about why Tesco shares dipped a couple of percent Thursday (18 June) in response to what looks like a solid first-quarter trading update.

The company didn’t give us a lot of information, though quarterly updates tend not to. But I’m really not seeing anything negative to be concerned about…

I am pleased with our progress in the first quarter, with customer satisfaction up strongly and continued sales growth building on the exceptional performance we delivered last year.

CEO Ken Murphy, Q1 update, 18 June

Here’s a taste of what Tesco delivered in the quarter…

• Total sales of £16.8bn, like-for-like up 1% with 1.8% growth in UK and ROI.
• Full-year operating profit guidance still strong at £3bn to £3.3bn.
• £341m returned via buybacks, out of £750m to be completed by April 20.

I find the lacklustre reaction to the results a little puzzling, given that I doubt we could have expected much more at this stage. Maybe investors were put off when the CEO spoke of “conflict in the Middle East creating ongoing uncertainty for many households” in his opening statement? Or perhaps everyone’s too excited by Space Exploration Technologies (aka SpaceX) to be bothered with something as boring as Tesco?

What’s the big attraction?

It seems a good time to consider what I see as the main strength for Tesco shares. And that’s its dividend prospects.

We’re looking at a modest forecast yield for the current year of 3.1%. That’s very close to the FTSE 100 average right now. But crucially, I rate it as probably one of the most stable in the index. And Tesco certainly appears to be generating the long-term cash to keep it growing.

With its last set of full-year results, Tesco raised the annual dividend by 5.8%. And a dividend that can keep growing ahead of inflation could ultimately contribute far more to a retirement pot than a bigger, here-today-gone-tomorrow, yield.

So what else is Tesco?

But to get back to my opening question, as well as just filling our shopping baskets, Tesco is also a champion at collecting consumer data and keeping customers coming back for more. To illustrate what I mean, I can’t do better than quote someone close to home…

The Tesco Media & Insight Platform captures about 58% of the British population each week, on par with Facebook and ahead of Sky in media reach terms. Analytics subsidiary Dunnhumby reports that multichannel campaigns on Tesco Media generate an average return on ad spend of £6.60, versus £3.80 on other channels.

Mark Hartley, The Twelfth Magpie

What should we do, then?

So is this a good time to consider buying Tesco shares? I actually think it always is, for investors with a long-term horizon. And I see a decent safety moat in case of future stock market falls. I expect many investors, though, will still keep being distracted by bigger headline dividend yields — like me.

Should you invest £5,000 in Tesco Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie 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 Tesco Plc made the list?

Alan Oscroft does not hold any positions in the companies mentioned.

The post As Tesco shares dip on Q1 results, is this a brilliant time to buy? appeared first on The Twelfth Magpie.