Tesco (LSE: TSC) shares have really delivered. They’re up 27% over 12 months and 75% across five years. The UK’s biggest grocer has shown bite after losing its way under former boss Philip Clarke, with consistent success for the last decade.
It’s now one of the most solid performers on the FTSE 100. Whenever I check the Tesco share price, it seems to be quietly doing its thing. Of course, there has been the odd bump. The shares took a knock after Donald Trump’s so-called ‘Liberation Day’ tariffs, even though Tesco wasn’t directly affected.
It soon bounced back and is now brushing off the market jitters caused by rising tensions between Israel and Iran.
Steady gains
Tesco has already seen off Brexit, Covid, the cost-of-living crisis, and the apparently unstoppable rise of Aldi and Lidl. According to Kantar Worldpanel, it now holds a 28% share of the UK grocery market, its highest in a decade. That’s well ahead of Sainsbury’s, which sits at 15.1%.
Its latest trading update, published on 12 June, showed UK food sales up 5.9% in Q1, with non-food sales up 6.2%.
Sales across all channels were growing, led by online, where revenue jumped 11.5%. Customer satisfaction improved too, while Tesco held its price position thanks to Aldi Price Match on 600 lines, 1,000 low everyday prices, and around 9,000 Clubcard deals each week.
It’s not easy being top dog, but this is a strong showing.
Dividend growth
Tesco has served up a reliable stream of income too. The trailing yield is currently 3.46%, which is down slightly due to recent share price growth.
In 2025, it paid a full-year dividend of 13.7p, up 13.2% on the previous year’s 12.1p. Over five years, payouts have grown at a compound annual rate of 8.41%. That’s not bad going.
There have been flat years, though. The dividend was frozen both in 2021 and 2023. Analysts expect it to stay flat at 13.7p in 2026. After that, they’re forecasting 15.1p in 2027 and 16.1p in 2028, lifting the projected yield to 4.4%.
So, this isn’t a completely free lunch. Some years offer a lighter portion than others, but it’s still tasty.
Valuation and verdict
Tesco is also returning cash to shareholders through buybacks. Since 10 April, it has repurchased £448m of shares under a £1.45bn programme set to run until April 2026.
The current price-to-earnings ratio is 14.2, which looks reasonable given the stock’s recent form. Analysts now expect slower growth though. The 12-month median forecast stands at 414.6p, suggesting a modest gain of around 5% from today’s level, with dividends on top.
Nine out of 16 analysts nonetheless label it a Strong Buy, with another three on Buy. Only one says Sell. That’s encouraging, but no company is bulletproof.
Margins remain wafer thin at 3% to 4%, and the grocery sector is brutally competitive. At some point, Asda or Morrisons might get their act together, which could take a bite out of profits. Aldi and Lidl will keep pressing. A future Tesco boss might also get it wrong, as Clarke once did.
There’s a saying that the only free lunch in investing is diversification. That still holds. Tesco shares aren’t risk-free. But I still think its shares are worth considering today.
