Tesco is best known for its sprawling grocery and department stores. The company controls more than one-quarter of the grocery market in the UK and is a dominant player in food shopping in countries throughout Europe and Asia, so it’s easy to understand why you may be considering whether to buy Tesco stock.
As one of the UK’s largest companies, Tesco is also a member of the FTSE 100. That alone makes it a popular investment for both beginner investors and large institutions alike. It doesn’t hurt that Tesco pays out a hefty dividend to shareholders, either.
If you want to buy Tesco shares but don’t know how to get started, this guide is for you. We’ll walk you through the process of buying Tesco shares and compare the top brokers you can use for the job. We’ll also take a closer look at Tesco’s merits to help you decide whether it’s a good buy in the current market.
Table of Contents
3 Quick Steps to Buy Tesco Shares
Can’t wait to buy Tesco shares? You can get started in just three easy steps:
Step 1: Find an Online Broker
Choose a top UK broker that allows you to buy Tesco shares, such as eToro.
Step 2: Deposit Money
Add funds to your brokerage account using a debit/credit card, e-wallet, or bank transfer.
Step 3: Buy Tesco Shares
Search for Tesco, enter how many shares you want to purchase, and click ‘Trade’.
75% of retail investors lose money when trading CFDs with this provider.
Where to Buy Tesco Shares
The easiest way to buy Tesco shares in the UK is to go through a licensed and registered share broker. There are many reputable share brokers you can use, and many of them won’t even charge a commission when you go to buy shares of Tesco or any other company.
But before you dive into buying shares, it’s important to note that online brokers differ in what you’re actually purchasing. Some brokers enable you to buy shares outright, which gives you exposure to the share price and makes you eligible for dividends.
Other brokers enable you to buy and sell contracts for difference (CFDs), which are derivatives that give you exposure to the share price without actually owning the shares themselves. The advantage of CFD trading is that you can leverage your position, effectively increasing the amount of money you have invested. The downside is that you’re not eligible for dividends when you buy CFDs.
With that difference in mind, let’s dive into a comparison of the best UK share brokers you can use to buy Tesco shares.
1. eToro - Market Leading Social Trading Broker
eToro is more than just a stockbroker. It’s also a full-fledged social network where you can follow other trader’s buying and selling activity, start discussions, and gauge market sentiment. Even better, beginner traders can take advantage of copy trading. This feature lets you use a portion of your portfolio to automatically copy the buying and selling activity of professional traders on eToro.
This investment platform gives you access to trade shares for more than 800 companies around the globe. You get to decide whether you want to buy shares outright or trade CFDs. eToro offers leverage of up to 1:5 for share trading. If you want to buy shares on the go, you can download the eToro mobile app.
Best of all, eToro is 100% commission free when you trade shares or any other assets on the platform. You will be charged a small spread, but eToro keeps the bid and ask prices very tight for most share trades. Beware the withdrawal and inactivity fees on this platform, though, which can add up if you’re not careful about managing your account.
You can try out eToro for free courtesy of the demo account or jump in with a $200 minimum deposit, which you can make via a range of methods, including PayPal. eToro is licensed by the FCA, in addition to several other authorities, so it’s a very secure and trustworthy investment platform.
- Affordable: No commission and tight spreads
- Global Companies: Access more than 800 shares
- Social Network: Copy and follow other traders’ positions
- Regulated Broker: Licensed by FCA
- Withdrawal and Inactivity Fees: Can add up over time
2. Plus500 - Buy and Sell Low Cost Share CFDs
Plus500 offers CFD trading for hundreds of global shares. It’s ideal if you only have a small amount of money to invest since you have the option to leverage your trades at up to 1:20. The broker doesn’t charge any trading commissions and the spreads on share trades are well below market average.
One of the best things about Plus500 is the trading platform. You get access to dozens of useful technical indicators, drawing tools, and beginner-friendly charts. Plus, the platform includes price alerts that you can customise so you never miss the opportunity to buy Tesco shares on a pullback.
The only downside to Plus500 is that it doesn’t offer all the tools that some advanced investors need. You cannot create custom indicators with the charting software, and there is no way to backtest a strategy. However, you can try out a new strategy in real time using the free demo platform.
- Leverage: Trade share CFDs at up to 1:20 margins
- Price Alerts: Never miss a bargain buying opportunity
- Demo Account: Test out strategies for free
- Limited Tools: Doesn’t include backtesting or custom analysis
3. Capital.com - CFD Broker with Education App
Capital.com goes above and beyond when it comes to catering to new share traders. The platform gives you free access to a number of guides for share trading, forex trading, commodities trading, and cryptocurrency trading to help you get started. On top of that, Capital.com has its own app that’s entirely dedicated to trader education. This is a huge plus for learning the ropes of investing before putting your money on the line.
That said, this broker doesn’t skimp on advanced tools, either. The platform gives you access to an AI trading bot that helps you find trading ideas if you want to go beyond buying Tesco shares. You also get access to advanced proprietary trading software that includes more than 75 technical indicators.
Capital.com’s share offerings are more limited than some other brokers, but you’ll still find CFDs for more than 100 companies. There are no trade commissions and the platform’s spreads are competitive. Even better, you don’t have to worry about an inactivity fee unless you stop trading for an entire year.
- Trader Education: Mobile app and guides
- AI Trading Bot: Find new trading ideas
- Advanced Charting: Access more than 75 technical indicators
- Limited Share Trading: CFDs only and limited selection
4. FinmaxFX - Mobile Share Trading App
While many share brokers offer trading on the go, FinmaxFX has one of the best mobile trading apps we’ve seen. You can access the broker’s proprietary charting software or access the MetaTrader 5 app for more advanced technical indicators and strategy testing tools. The app is available for both iOS and Android, and you can also access FinmaxFX through your browser.
While this broker’s selection of shares isn’t enormous, it does offer trading for around 180 global companies. You can buy and sell CFDs with leverage of up to 20:1. If you want to diversify your portfolio down the road, FinmaxFX also offers forex trading, commodity trading, and cryptocurrency trading.
FinmaxFX doesn’t charge any trade commissions, but the spreads at this broker are somewhat higher than average. You’ll also need to watch out for withdrawal fees, which can eat up to 3% of your money depending on the transfer method you use. The inactivity fee kicks in after two months without trading.
- Mobile Trading App: Trade and chart on the go
- MetaTrader 5: Backtest strategies and create custom indicators
- Leverage: Trade share CFDs at up to 20:1
- Withdrawal Fees: Up to 3% of your transfer
Why Invest in Tesco?
Tesco is the single largest grocer in the UK and one of the top 10 largest retailers in the world by revenue. While size is in some respects an indicator of success, it’s important to consider what the future may bring for Tesco before you decide whether or not to invest.
So, let’s take a look at some of the main reasons why analysts think Tesco shares may be a worthwhile investment in the current market.
For many investors, the main reason to buy Tesco shares is that they’re a relatively low risk bet as far as the market goes. People need to buy groceries no matter what else is happening in the world or economy. That makes Tesco shares much more resilient to economic shocks and volatility that drive the market to extremes. In the words of analysts, Tesco is ‘defensive’.
This defensive nature was clearly on display during the coronavirus pandemic. While a number of highly traded FTSE 100 companies dropped more than 40% in the wake of the crisis, Tesco was only down 11% as of early June 2020. Keeping Tesco shares in your portfolio is one way for investors to diversify their holdings and reduce risk while still staying exposed to the market.
Another big advantage to buying Tesco shares is that they come with a dividend. The company makes two dividend payments per year, and the amount of each payment has been increasing rapidly. The last dividend, in October 2019, was 2.65p per share. The next dividend, scheduled for July 2020, is expected to be 6.5p per share.
That might not sound like much money, but it’s equivalent to a 4% return on Tesco shares each year. That’s a pretty significant return just for holding the shares in your portfolio.
It’s hard to predict what Tesco’s future will look like, but much of the company’s financial growth in coming years may be driven by its recent acquisition of the UK wholesaler Booker. Tesco is already anticipating that the deal will increase revenue by £200 million per year through cost savings alone.
Booker could also give Tesco access to pubs and restaurants throughout the UK that rely on its wholesale food service. That’s a potential boon to Tesco, since it’s been struggling to keep up with the shift towards away from home dining.
While this deal was an expensive one for Tesco – the company paid £3.7 billion for the acquisition – it hasn’t hurt the company’s finances. Tesco funded the deal with new shares, so it retains plenty of free cash flow to enable it to maximise Booker’s utility for revenue growth.
About Tesco Shares
Company and Share History
Tesco was founded in 1919 by Jack Cohen as a set of food stalls in the UK. The first storefront opened in Middlesex in 1931, and Cohen opened more than 100 Tesco stores across the UK by the start of World War II. The company prospered during the 1940s and listed on the London Stock Exchange in 1947.
By the end of the 1960s, Tesco acquired or opened more than 800 stores. It outbid its closest competitor, Sainburys, for the Scotland-based chain William Low in 1994. Tesco also expanded internationally throughout the 1990s, although it pulled out of the US market in 2013.
Tesco also slowly diversified its range of products over the course of decades. The company has sold petrol since the 1960s and began selling retail goods online in the late 1990s. Tesco also introduced the Clubcard, which has enabled it to maintain customer loyalty and provided it with data that has been critical in giving it an advantage over competitors.
Tesco Share Price
Tesco began trading in 1947 on the London Stock Exchange at a price of 25p per share. Tesco shares rose quickly in value during the 1990s as the company expanded into new markets, both at home in the UK and abroad, and the share price reached an all-time high of 491p in 2007.
However, Tesco declined for several years after the financial crisis amid lacklustre revenue growth and failure in the US grocery market. Today, Tesco shares trade for around 226p.
How to Buy Tesco Shares on eToro
To help you get started with buying Tesco shares through a UK stock brokers, we’ll show you how the process works with eToro.
We like using eToro because it is 100% commission free for share trades and offers access to more than 800 global shares. Plus, you can buy shares outright, which makes you eligible to collect dividends from Tesco.
If you decide to use another trading platform, the process to buy Tesco shares will be similar.
Step 1: Search for Tesco Shares
Enter ‘Tesco’ in the search bar at the top of the page. Click on the company when it appears in the drop-down menu.
Step 2: Click on ‘Trade’
From the Tesco company page, click on ‘Trade’ to open a new order.
Step 3: Buy Tesco Shares
You should now see an order form that needs to be filled out with the following information:
- Amount: How many shares of Tesco do you want to buy? You can enter an amount to invest in US dollars, or click the ‘Units’ button and specify a number of Tesco shares. Note that eToro supports buying fractional shares.
- Set Rate: If you select ‘Market’ then eToro will buy Tesco shares for you at the current market price. You can also choose to create a limit order by setting the maximum amount you’re willing to pay for Tesco shares. Your order will only be executed if the price of Tesco falls below your maximum price.
- Stop loss: We highly recommend setting a stop loss with every trade. This is a price below the price you pay for Tesco. If Tesco shares fall to your stop loss price, eToro will automatically sell your shares to prevent you from taking a bigger financial loss.
- Take Profit: If you want to sell your shares after a certain amount of profit, you can include a take profit level in your order. When Tesco shares reach this price, eToro will sell all your shares. Don’t enter a take profit price if you plan to hold Tesco for the long term.
You can also specify how much leverage you want to use when trading share CFDs. We recommend against using leverage if you are new to share trading since it significantly increases your financial risk if a trade goes poorly.
When you’re ready to buy Tesco shares, click ‘Trade’ to complete your order.
Should I Buy Tesco Shares?
Tesco is the largest grocer in the UK and operates grocery chains in a number of global markets. It is considered a defensive stock that is relatively resistant to economic downturns, which can make it attractive to investors looking to reduce the risk in their portfolios.
Another benefit to Tesco stock is that it comes with an attractive dividend yield of more than 4%. That said, the company has struggled since the share price peaked in 2007, so potential investors should look carefully at what the future has in store for Tesco.
If you want to buy Tesco shares today, there’s no better place to do so than eToro. With 0% commission, copy trading tools and the ability to buy shares or trade CFDs, there’s plenty to like about eToro. Simply click the link below to get started today!
eToro: Buy Shares with 0% Commission
- Buy over 800 global shares
- No commission and tight spreads
- Social and copy trading tools
- Accepts PayPal
- FCA regulated
Has Tesco’s dividend been consistent?
Tesco’s dividend has been less consistent than many investors would like. The company suspended the dividend altogether for a number of years as the share price and revenue fell in the mid-2010’s. Tesco reinstated its dividend in 2018, and the dividend is intended to grow until half of the company’s profits are paid out to shareholders.
Who are Tesco’s competitors?
The grocery market in the UK and worldwide is highly competitive. In the UK, Tesco competes closely with Sainbury’s, another grocery chain, as well as Aldi and Ocado. Tesco may also increasingly compete with Amazon as the eCommerce behemoth moves into online grocery sales and delivery.
Do I need to use a UK-based broker to buy Tesco shares?
You do not need to use a UK broker to buy Tesco shares, but your broker must be recognised by the UK’s Financial Conduct Authority (FCA) in order to trade shares of companies on the London Stock Exchange. FCA approval is also a good sign that a broker is trustworthy.