Here is Tesco's dividend forecast until 2027

Tesco (LSE:TSCO) shares have rallied since I last covered the stock in May.

I was very happy with the stock. With inflation and the cost of living crisis coming to an end, it was clear that Tesco had emerged as one of the biggest winners in a turbulent consumer era.

Perhaps because of its economy of scale, Tesco was one of the few British supermarkets that did not lose market share to its expensive German peers, Aldi and Lidl.

However, this renewed share price – taking it to levels not seen for a decade – also means that the dividend yield has fallen.

Investing today, the dividend yield based on the last 12 months' payments is 3.3%. But it is always important to look at where the dividend yield can go. Here's what analysts have to say.

Budget forecast

The table below shows the expected increase in dividend payments until 2027. As we can see, earnings are expected to rise at a steady pace, almost in line with expected earnings growth.

The current dividend for 2025 is essentially the same as FTSE 100 average. I would suggest that the increase in dividend payments will mean that Tesco becomes an above average dividend payer in the medium term.

Exceeding the target value

Interestingly, Tesco stock recently surpassed the consensus price. The price target is the average estimate of fair value from all analysts – in this case, 14 – covering the stock.

UK-listed stocks often trade at a significant discount to their target price. That is purely sentimental as investors have not liked the UK economy or British stocks for a long time.

Currently, there are six 'buy' ratings, five 'outperform' ratings, two 'hold' ratings, and one 'underperform' rating.

So, there is a mixed picture. Analysts have expressed optimism about the stock, but recent rapid share price growth means many shares are overpriced.

Premium for size

Tesco broadly trades in line with its peers, likely at a modest premium. The stock currently trades at 14.4 times forward earnings for 2025, 13.4 times for 2026, and 12.6 times for 2027. As it happens, this is very much in line with the average index.

While this data does not suggest that Tesco is a slam dunk buy, it is worth noting that investors are often happy to pay for a company with a large market share.

It's also possible to imagine that as inflation cools and spending habits normalize, Tesco could benefit greatly as shoppers ditch Aldi and Lidl for a premium shopping experience.

Of course, there are always risks that investors need to stay on top of. The Labor Government is determined to do more for workers' rights and Tesco recently lost a legal case against shopkeepers' union Usdaw over its 'fire and hire' strategy.