Metcash Limited (ASX: MTS) shares haven't be faring too well over the last 12 months.
During this time, the wholesale distributor's shares have lost 12% of their value, as you can see on the chart below.
While this is disappointing, one positive is that it makes the dividend yield on offer with its shares much more attractive.
For example, in June, Metcash released its FY 2023 results and declared a 22.5 cents per share dividend. This equates to a 6.15% dividend yield at current prices.
Are Metcash shares a buying opportunity?
At present, most of the broker community is sitting on the fence when it comes to Metcash shares.
For example, Citi currently has a neutral rating and a $4 price target, Macquarie has a neutral rating and a $3.90 price target, and Goldman Sachs is also neutral with a $3.70 price target.
Goldman explained that it is neutral due to its belief that Metcash is going to be negatively impacted by rising competition in the supermarket industry and easing food inflation. It explains:
We are Neutral rated on this stock primarily due to moderating supermarket inflation and rising competition, both of which we expect to negatively impact MTS's Food sales and EBIT.
Specifically, we believe: 1) Moderating inflation will dampen supermarket industry growth, resulting in a compressed industry profit pool and spurring more intensified market share grab; 2) Online growth will continue to take share from local shopping, with major investments from COL/WOW set to improve ranges (up to ~45K SKUs from Ocado) and same day delivery capacity (from omni-channel infrastructure by both COL/WOW). In our view this is largely priced into consensus expectations, with MTS trading in line with its long run P/E valuation.
However, if you're simply looking for income, then Metcash could arguably tick a lot of boxes for you despite these neutral ratings.
For example, Citi is forecasting fully franked dividends per share of 20 cents in FY 2024, 22 cents in FY 2025, and 22 cents in FY 2026. This would mean yields of 5.4%, 6%, and 6%, respectively.
