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Summer season is quick approaching and I’ve been taking inventory of my portfolio after an eventful begin to the yr. This yr, the FTSE 100 Index has gained 3.9%, as I write on 6 Could, to sit down at 8,578 factors.
One space I’ve been contemplating shopping for into currently is retail. Discretionary retail shares corresponding to clothes manufacturers are usually cyclical as their earnings are closely tied to the economic system and shopper spending.
As a long-term investor, I discover it tough to get snug with discretionary retail. It’s exhausting to distinguish between an inexpensive inventory prepared for a giant earnings restoration and those who might fade away.
That’s why my focus is on the patron staples sector, together with groceries. These corporations have a tendency to offer important items and are extra insulated from the ups and downs of the financial cycle.
With that in thoughts, J Sainsbury (LSE: SBRY) is one FTSE 100 inventory that I feel buyers ought to think about shopping for.
Rising grocery gross sales
Shares within the UK meals retailer have been underneath stress in 2025. The corporate’s inventory value has fallen 2% to this point this yr to £2.70 and have managed to achieve simply 0.8% within the final 12 months.
Whereas that could be a warning signal to some, I feel seeing by way of near-term volatility and shopping for secure, profitable corporations is the important thing to long-term investing success.
Sainsbury’s full-year outcomes had been broadly according to analysts’ expectations. Full-year gross sales had been up 3.1% to £31.6bn with greater grocery volumes offering a lift regardless of weaker Argos gross sales.
Free money stream declined from £0.6bn to £0.5bn as the corporate’s ongoing cost-cutting train was offset by greater ranges of funding and the timing of funds to clients and suppliers.
Nonetheless, it wasn’t all excellent news for buyers. Subsequent yr’s steerage displays comparatively muted development expectations with fierce competitors and inflationary pressures holding margins low.
Robust dividend coverage
I like that the inventory provides a wholesome 4.8% dividend yield. That’s nicely above the present Footsie common of round 3.5%. This shareholder-friendly coverage is mirrored in regular dividend payouts of 13.1p in 2024 and 13.6p for the yr ending March 2025.
There may be additionally a particular dividend and new share buyback scheme, which ought to ship £450m again to shareholders.
Valuation
Sainsbury’s shares are buying and selling at a price-to-earnings (P/E) ratio of 15.3 proper now. That’s a contact beneath its main competitor Tesco (16.3), which additionally has a decrease dividend yield of three.6%.
I’m cautious of some relative valuations within the area, nevertheless, with Sainsbury’s non-food phase lagging in efficiency barely and muddying the waters by way of an apples-to-apples comparability.
Verdict
All in all, I feel Sainsbury’s is a FTSE 100 retail inventory for buyers to think about. I feel the corporate is a dependable dividend payer that has a transparent pathway ahead to develop grocery gross sales and improve free money stream.
The corporate’s softer steerage for subsequent yr does level to some challenges round competitors and development. Nonetheless, it’s sturdy shareholder returns ought to assist to melt that blow.
Whereas I don’t have the spare money to speculate proper now, it’s one inventory that I’ll significantly think about to spice up my portfolio’s dividend yield within the close to future.
