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Tesco share price: Shore Capital flags potential for special dividends

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Shore Capital remains bullish on Tesco (LON:TSCO), arguing that the outlook to 2021 is positive and special dividends could be paid in future, Citywire reports. The comments came after Britain’s biggest grocer announced the launch of its new highly-anticipated discount chain Jack’s yesterday.

Tesco’s share price rose marginally in the previous session, adding 0.30 percent to close at 235.80p. The shares marginally underperformed the broader UK market, with the benchmark FTSE 100 index adding 30.89 points to close 0.42 percent higher at 7,331.12, as investors digested the latest developments between the US and China.

ShoreCap bullish on Tesco

Citywire reported yesterday that Shore Capital analyst Clive Black had retained his ‘buy’ recommendation on Tesco, arguing that the broker saw the grocer’s “current valuation, particularly on an earnings basis with a modest present income yield as being far from bargain basement”.

“However, we also forecast very strong earnings per share growth out to full-year 2021,” he pointed out, adding that the supermarket had scope for further deleveraging and “indeed we cannot rule out that Tesco may follow where Morrisons’ has led, in exploring recurring special dividends in time”.

“All in all, Tesco has been re-engineering, for which [chief executive Dave] Lewis deserves great credit,” Black said, as quoted by the newswire.

Analysts weigh in on Jack’s launch

ShoreCap’s comments follow the launch of Tesco’s new discount chain Jack’s which will see Britain’s biggest grocer take on Aldi and Lidl.

The Times reported that Bryan Roberts, insights director at TCC Global, had praised the look and feel of Jack’s stores, while noting that a maximum of 15 stores by 2019 is much more modest than expected.

“”And it’s surprising that the front of the store carries the message: ‘Part of the Tesco family,” the analyst pointed out, adding that this “might lead to awkward questions from customers who wonder why they can’t use their Clubcard, or why there’s a price differentiation between the stores”.

As of 08:07 BST, Thursday, 20 September, Tesco PLC share price is 235.80p.

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