Here’s the dividend forecast for Tesco shares until 2027.

Tesco The company’s shares (LSE:TSCO) have soared since I last covered it in May.

I was quite bullish on the stock. As inflation fell and the cost of living crisis ended, it became clear that Tesco had emerged as one of the biggest winners of a rather turbulent period for grocery stores.

Perhaps thanks to economies of scale, Tesco was one of the few traditional British supermarkets that did not lose market share to cheaper German competitors Aldi and Lidl.

However, this rise in share prices — reaching levels not seen in a decade — also means that dividend yields have fallen.

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

Dividend forecast

The table below shows the expected growth in dividend payments through 2027. As you can see, dividends are set to grow at a fairly solid pace, almost keeping pace with the growth in expected profits.

	2025	2026	2027
Dividend per share	12.98p	14:14	15.31
Earnings per share	25.3p	27.2p	29p
Dividend yield	3.55%	3.87%	4.19%

The current dividend for 2025 is effectively the same as FTSE100 Average. I would suggest that the increases in dividend payments will mean that Tesco will become an above-average dividend payer over the medium term.

Exceeding price target

Interestingly, Tesco shares recently beat the consensus price. The consensus price is the average fair value estimate from all analysts — in this case 14 — covering the stock.

UK stocks tend to trade at a significant discount to their average share price target. This is simply a matter of sentiment, as investors have not been particularly keen on the UK economy or UK stocks for some time.

There are currently six “Buy” ratings, five “Outperform” ratings, two “Hold” ratings and just one “Underperform” rating.

So the picture is mixed. Analysts have indicated they are bullish on the stock, but the recent rapid share price rally means the stock has exceeded many of its price targets.

Size Bonus

Tesco is broadly trading in line with its peers, potentially at a modest premium. The stock is currently trading at 14.4 times forward earnings for 2025, 13.4 times for 2026 and 12.6 times for 2027. Incidentally, this is also very much in line with the index average.

While this data does not suggest that Tesco shares are a sure buy, it is worth noting that investors are often happy to pay a premium for a company with a dominant market share.

It is also conceivable that as inflation falls and shopping habits normalise, Tesco could reap further benefits as customers ditch Aldi and Lidl for more upmarket shopping options.

Of course, there are always risks that investors need to watch out for. The Labour government is determined to do more for workers’ rights, with Tesco recently losing a court case against the Usdaw store workers’ union over its “fire and rehire” strategy.