Both have beenlooking well past their sell-by date, with Morrisons down38% in the last 12 monthsandSainsburys down 42%. But in recent days, an astonishing thing has happened. Morrisons, which has even out-stunk Tesco at times, suddenly looks a bit fresher.
Could this be a sign of a tastier 2015?
Rise And Shine
Morrisons is up almost 15% to 176p in the last month, after Q3 results showed animproved net debt position, at2.6bn, and chief executive Dalton Philips predicted same-for-same store revenues would bounce back next year.
Its Match & More price matching campaign may actually be working, while management has identified more than 1bn of cost savings, and remains publicly committed to a progressive and sustainable dividend.
The current 7.35% yield is certainly oneto sink your teeth into.
Fine Young Cannibals
Its a pleasant change to report some good news from the supermarket sector, so lets linger over those positives while we move onto Sainsburys, the supermarket thats posher than Tesco but doffs its cap toWaitrose.
The days when Sainsburyscould proudly boast 36 consecutive quarters of growthare gone, as it alsofalls victim to the wages squeeze, the onward march of Aldi and Lidl, and wider sectoral decline.
Confidence is clearly low at Sainsburys, which recently warned of years of negative same-store sales growth for the industry, as cash-strapped shoppers chase prices down, and convenience store cannibalisation continues.
Shore Capitals recent gloomy forecast of a 30% reset in earnings per share at Sainsburys, and three years of declining profits and dividends, have dented investorconfidence too. The stock is down 7% over the last month.
This has put Sainsburys yield on a crunchy 7.45%, but dont be deceived, thats unlikely to last.
More Reasons To Buy Morrisons
At least Morrisons is making good its most glaring failures, finally launching its online channel and making a late dash for convenience store growth, while maintaining its capital discipline.
Things got so bad at Morrisons they could only get better, and its worth buying for thatlusciousyield alone, assumingmanagement really can sustain it. Sainsburys may betrading at a temptingly low 6.2 times earnings, but given its putridoutlook, it looks like a value trap to me.
Both supermarkets now offer amazing yields, but there are safer dividends to be found on the FTSE 100.
Plenty of top stocks yield 5% or even 6% a year, and they generally have farjuicier prospects than can be found in today’s withered supermarket sector.
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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.