After three years in the wilderness, Tesco investors were finally rewarded for their loyalty yesterday.
Given the grocer had posted a 667 per cent rise in pre-tax profits, it was clearly a good time for Drastic Dave Lewis to reinstate the dividend, albeit a modest 1p per share.
But given how topsy turvy retailing (and in particular the supermarket sector) has been in recent years, this is more than just an act of generosity for those who have stuck with the stock.
After seven consecutive improvements in like-for-like sales, it’s the most positive sign we have had yet that Tesco’s management is finally confident that it is emerging from the woods.
The act of recommending a dividend after its recent troubles is far more important than the amount itself, and it speaks volumes about progress made under Lewis so far, and the progress it expects to make in the next couple of years.
The fact it has done this at a time when so many other retailers are feeling the twin pressures of inflation and the discount challengers, is even more impressive.
Yesterday’s results will also give commentators something else to talk about beyond the trial taking place, in which three former Tesco executives stand accused of fraud and false accounting during 2014, when profit estimates were overstated.
It remains the case that some grey clouds still sit on the horizon. The Booker merger, which is opposed by some of Tesco’s biggest investors (but, to supporters, a vital part of making Tesco fit for the future), could still upset the shopping cart.
Lewis needs to convince the Competition and Markets Authority that their concerns it would damage competition in more than 350 areas is misplaced, but the recent plight of supplier Palmer & Harvey could make that harder to do.
Having come so far in just three years, it’s essential that Tesco does not stumble now. No doubt Lewis will have considered all these factors before signing off the dividend, but if he is tripped up by Booker there will be limited capacity for any more “drastic” behaviour.