Sainsbury’s trims dividend

J Sainsbury has revealed that first half pre-tax profits rose but adjusted profits dropped 10%, which has led to it trimming its dividend to 3.6 pence per share, says Helal Miah, investment research analyst at The Share Centre.

Sainsbury’s trims dividend

The company noted that the market remains competitive and pricing pressures continue to impact margins and as a result, it now expects second half adjusted profits to be lower than achieved in the first half due to continued investment in price.

In September this year, the company completed a £1.4bn takeover of Argos owner Home Retail Group, which it was keen to reiterate is on target of achieving £160m of synergy savings over three years. It plans to have 30 Argos digital stores and 200 digital collection points in Sainsbury’s supermarkets by Christmas and is targeting 250 Argos digital stores in supermarkets over the next three years.

Investors should appreciate that Sainsbury has a solid balance sheet, which ensures it is fit to meet the challenges it is being presented with. However, to maintain that strength, dividend income has fallen as it targets dividend cover of two times its underlying earnings. Its balance sheet could put the group in a stronger position over peers to help defend its market share.


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