I've decided to spend the remaining amount of money from my recent Car sale to purchase shares in Tesco. The UK supermarket share prices have all dropped significantly through 2014. Tesco, Sainsbury's and Morrisons are all offering high dividend yields for a low purchase price. So, why did I go for Tesco?
Tesco are the market leader in this sector by some degree. It has the biggest profit margin out of the big three, and it's been renowned as one of the most reliable dividend paying stocks in the sector.
Both Sainsbury's and Morrisons are offering a higher yield and better dividend growth over the last 5 years. However, they also share a much lower dividend cover than Tesco. I feel that Tesco have more room to cope with the difficult times the Big Three are experiencing with stiff competition from the value options of Aldi and Lidl. I believe the short term offerings of Sainsbury's and Morrisons are more attractive, but are equally more dangerous. Like a poisonous apple enticing you in with a tempting offering, only to strike you down once you've taken a bite. Now of course, I don't know this for sure, but this is my interpretation of what I've read about the companies and I feel safer putting my money into Tesco long term over the other two.
Tesco hasn't increased it's dividend for 3 years now, so why am I purchasing them?????
For the last 10+ years Tesco have been paying high dividend yields which have been growing every year (apart from the last 3). They haven't grown their dividend, but it hasn't decreased either.
Their share price has dropped 25% in the last year and are right at the bottom of their 52 week low.
I believe Tesco's share price, and dividend yield represent good value for the current share price. I'm confident of gaining some good portfolio growth here, as well as benefiting from a stable 4.4% yield. Tesco should slowly but surely turn things around. They are a retail behemoth, not a small cap company. It might not happen overnight, but I'm taking a long term investment decision here. I would like to be a shareholder of Tesco for the rest of my life. Lets see if that was a good call or not!
Here are the purchase details:
I bought 364 shares at 299.843p. The total purchase price (including charges) was £1,108.84.
Well, I found that April was a busy month for purchases, how was it for you? What are our thoughts on Tesco as a buy? Do you think I made a good call here?
Labels: Stock Purchase