£10,000 invested in Sainsbury’s shares 2 years ago is now worth…

How have Sainsbury’s shares performed over the last two years? Are they worth considering today? Our writer gives his take on both questions.

| More on:

Image source: Getty Images

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.

Are defensive shares back on the menu? With economic projections looking gloomy and talk of a recession not far from people’s lips, companies with products folk buy through thick and thin might outperform. And even better if they offer a decent dividend along with the main course. Shares that might fit the bill include the nation’s second biggest supermarket, Sainsbury’s (LSE: SAIN). 

A £10k stake

Recent performance from the shares has been mediocre. A stake bought two years ago is only up 2.7% in value. I could have earned more through a savings account. Tesco is up 50% by comparison. It’s not been a great time for existing Sainsbury’s shareholders but it could mean a buying opportunity. 

Created with Highcharts 11.4.3J Sainsbury Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Then there is the question of dividends. Sainsbury’s pays a 5.11% yield, going from the last 12 months, one of the higher payers on the FTSE 100. It’s no flash in the pan, either. A dividend has been paid every year since 2007. Such a weighty payout can make a static share price less of an issue. 

Should you invest £1,000 in Sainsbury's right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool 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 Sainsbury's made the list?

See the 6 stocks

That 1.7% increase over two years becomes 13.96% when looking at total return (dividends reinvested). A £10,000 stake turns into £11,396, which is the attraction of this kind of dividend stock.

Sainsbury’s is coming off a “best ever Christmas” too. The festive period is a busy one for the big shops and CEO Simon Roberts was happy to announce winning “market share for the fifth consecutive Christmas”. This is great stuff in such a competitive sector. With budget options like Lidl, Aldi, or even Tesco snapping at the heels at one end, and prestige supermarkets like Waitrose and Marks and Spencer at the other, it’s a very good sign that Sainsbury’s is holding its ground in the middle. 

A squeeze

The big news Sainsbury’s is grappling with is, of course, the bump in Employer’s National Insurance. This cost affects almost all companies, but it disproportionately affects supermarkets where the twin issues of wafer-thin margins and a large workforce put the squeeze on at both ends. 

Management has mooted a £148m tax bill against net income of around £1bn. I doubt many other firms will be dealing with such a large slice taken out of their profits. Investors aren’t too pleased either – the shares dropped like a stone after the Budget and are still 13% down as I write.

The response has been to axe 3,000 jobs, including 20% of senior management, along with closing its in-store cafes. That might help the bottom line a bit but cutting services is not what I’m hoping to see, not to mention the human cost of so many people being put out of work. 

That’s probably the key question when it comes to my own decision. I like the defensive properties of the supermarket sector – I have some exposure already – and I suspect it will be a strong performer in a seemingly grim economic period. But I don’t think there’s enough in Sainsbury’s for me to buy in today.

Should you buy Sainsbury's shares today?

Before you decide, please take a moment to review this first.

Because my colleague Mark Rogers – The Motley Fool UK’s Director of Investing – has released this special report.

It’s called ‘5 Stocks for Trying to Build Wealth After 50’.

And it’s yours, free.

Of course, the decade ahead looks hazardous. What with inflation recently hitting 40-year highs, a ‘cost of living crisis’ and threat of a new Cold War, knowing where to invest has never been trickier.

And yet, despite the UK stock market recently hitting a new all-time high, Mark and his team think many shares still trade at a substantial discount, offering savvy investors plenty of potential opportunities to strike.

That’s why now could be an ideal time to secure this valuable investment research.

Mark’s ‘Foolish’ analysts have scoured the markets low and high.

This special report reveals 5 of his favourite long-term ‘Buys’.

Please, don’t make any big decisions before seeing them.

Claim your free copy now

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.

John Fieldsend has positions in Tesco Plc. The Motley Fool UK has recommended J Sainsbury Plc and Tesco Plc. 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.

Our best passive income stock ideas

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Investing Articles

£20k across this FTSE 100 share and ETF would have more than DOUBLED in just 5 years!

Looking for ways to supercharge your stocks portfolio? Consider a lump sum investment in this FTSE 100 share and this…

Read more »

Black father and two young daughters dancing at home
Investing Articles

Just released: our 3 top small-cap stocks to consider buying before March [PREMIUM PICKS]

Small-cap shares tend to be more volatile than larger companies, so we suggest investors should look to build up a…

Read more »

Investing Articles

As the British American Tobacco share price drops 10%, should investors buy the dip?

A share price slump has pushed British American Tobacco's dividend yield over 8%. Should investors consider buying this FTSE 100…

Read more »

Investing Articles

Prediction: this investment trust will easily outperform the FTSE 250

Our writer shines the spotlight on a FTSE 250 investment trust that he thinks looks set up for strong long-term…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

Should I buy more BAE Systems shares for my Stocks and Shares ISA?

This investor in BAE Systems shares takes a look at the FTSE 100 defence firm's annual results to decide if…

Read more »

Investing Articles

Does this news mean a fresh start for the Centrica share price?

The Centrica share price has gone nowhere over the last year. But the stock has spiked following strong results and…

Read more »

Investing Articles

2 UK dividend shares that aren’t what they seem

Investors need to look carefully when it comes to dividend shares. Sometimes the actual yield can be higher or lower…

Read more »

Frustrated young white male looking disconsolate while sat on his sofa holding a beer
Investing Articles

This S&P 500 giant just fell 16% after hitting an all-time high. Time for me to sell?

Mark Hartley considers whether to keep holding his Axon Enterprise shares after the S&P 500 stock plummeted from fresh highs…

Read more »