Sainsbury’s (LSE: SBRY) has been a strong dividend inventory for years however its share price hasn’t proven a lot life. Till now.

Shares within the FTSE 100 grocery large jumped 11.95% within the final month. And that’s at a time when the blue-chip index as an entire edged up simply 0.34%.

This isn’t only a flash within the pan. The Sainsbury’s share price is up 47.98% over two years, albeit with some volatility alongside the way in which. Over one 12 months, it’s up 12.33%.

I’m delighted to see Sainsbury’s lastly seize the limelight. Traders recognised the risk posed by German discounters Aldi and Lidl a number of years in the past, and determined it couldn’t lower the mustard. They underestimated it.

Can Sainsbury’s proceed to chunk again?

Sainsbury’s has sharpened up. Final month, it posted its largest annual acquire in market share since manner again in 1997. It climbed 50 foundation factors to fifteen.3% within the 12 weeks to 4 August, in line with Kantar.

I’m happy however somewhat irritated. On 23 July, I stunned myself by naming Sainsbury’s as one in all three FTSE 100 dividend shares I’d like to purchase if I had money handy. Sadly, I wasn’t capable of increase the funds on the time. 

Because the cost-of-living disaster eases, grocery gross sales are recovering, up 9.4% within the 12 months to 2 March. Retail gross sales (excluding gasoline) jumped 6.8% to £30.6bn, with underlying working revenue up 4.3% to £966m.

The board expects that to climb to between £1.01bn and £1.06bn this monetary 12 months, an increase of between 5% and 10%. Once more, grocery gross sales ought to cleared the path. CEO Simon Roberts feels vindicated for placing “food back at the heart of Sainsbury’s”.

This can be a aggressive market and all the massive grocers work to search out margins. In 2024, Sainsbury’s had internet margins of 1.63%, which is fairly slender. Rival Tesco beat it with 4.03%. Return on capital employed can also be tight at simply 4%.

Strong FTSE 100 earnings inventory

It’s the character of the sector. Sainsbury’s has greater than 1,440 shops, that are open up to 90 hours per week, and run by round 150,000 workers.

Will increase to the nationwide minimal wage have added to prices, whereas rumours that Labour might impose nationwide insurance coverage on personal sector employer pension contributions received’t assist in the event that they become true. We’ll know extra after the Price range on 30 October.

In the present day, Sainsbury’s shares yield 4.4%, which is comfortably above the FTSE 100 common of three.8%. Payouts are coated 1.7 instances by earnings. Sadly, the dividend per share has been held at 13.1p for the final three years. The board has stretched to a £200m share buyback programme, to be accomplished by March, however that dividend freeze remains to be disappointing. 

Regardless of the sturdy current run, the shares don’t look overvalued, buying and selling at 13.6 instances earnings. That’s under the FTSE 100 common P/E of 15.7 instances.

Sainsbury’s is exhibiting its tooth in a troublesome sector. I want I’d purchased it in July, earlier than the current spike. I’m nonetheless eager to purchase, however might await the share price to settle down somewhat.