Sainsbury’s Shares are Sweeter than Nectar

December 30, 2022 | By Paul Mackenzie Ross | Filed in: finance.

Just over a year ago I started dabbling in shares via the Freetrade app. My trading philosophy is to buy shares in services that I use and claw back some of what I spend almost as discounts or cash back.

My supermarket of choice, until the cost of living crisis, has always been Sainsbury’s. It might be a little more expensive than Asda or Tesco and not quite as pricey as Waitrose, so it’s a happy medium.

Sainsbury’s loyalty scheme is Nectar which was once called Air Miles, if I recall correctly. For every £2 you spend In Sainsbury’s you get a nectar point. Earning one hundred nectar points, you’ve got a pound to spend. So to earn £1 you need to spend £200. That’s a 0.5% return on investment.

On the Freetrade app it says the Sainsbury’s dividend yield is 5.55%

You don’t have to be a genius to work that out but you get 11 times better ROI having shares rather than Nectar points.

So when I spent £30 of Nectar this Christmas that was off the back of spending £6,000 on groceries and fuel. The simple maths of shares is that £6,000 worth of Sainsbury’s shares would have earned me a dividend of £330.Thinking alternatively, to have earned £30 to spend in the supermarket I’d have had to have invested only £540.54 in shares.

As you can see, having shares in Sainsbury’s provides a better return than spending to earn Nectar points. That’s not to say you shouldn’t keep collecting your loyalty points, especially if their fuel’s cheap and you can get “triple points” vouchers every so often. But if you want £30 at the end of the year to spend on extra seasonal treats, you only have to invest a little over £500 to get that not a whopping £6,000.

I wish I had a spare £500 to do that, but things are tight at the moment. If you’ve got the money, that’s a good bet and you can sell your shares too, getting your £500 back if their price is stable.

So that’s a decent philosophy – invest in supermarkets, banks, insurance companies, telecoms and energy providers. They always take money from you, so now it’s time to get some back. Shareholders are often bemoaned for getting their money when standards and services go down. Don’t be a victim, if you can’t beat ‘em, join ‘em. And play them at their own game, even though your stakes may be small.

You can download the Freetrade app for free on Android or iOS, but if you want an invite and start your account with £50 in it, we can both get a free share worth between £10 and £100 – just ask me for a referral.

NB: I am not a financial advisor nor am I regulated by any industry standards. The value of stocks and shares can decrease as well as increase, so you may not get your initial investment back and dividend yields may vary. This is not financial advice but merely commentary and observation from my own experiences trading small amounts in the stock market. I do own a small amount if shares in Sainsbury’s and wish I could invest the amounts that I’ve estimated in this blog post.

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