Tesco (LSE: TSCO) share price is up 54% over the last five years. However, the value of the £5,000 invested then would have increased to slightly more than the suggested £7,700. And it’s all thanks to dividends.

An investor who put in so much cash at the end of December 2020 could now be looking at a pot worth £9,600. Why so many?

In February 2021, Tesco paid a huge special dividend of 50.93p per share. The money came from cash raised from the divestment of the company’s operations in Malaysia and Thailand, ending a turbulent period of trying to enter the booming retail industry in Southeast Asia.

As a result, the share price then fell, but this was undoubtedly justified. And this highlights a good lesson. Anyone who sold just because the price dropped by a certain amount would miss the bigger picture.

I think Tesco did the right thing. Foreign expansion was risky and involved competition from local residents who knew their markets better. Do we really need the UK’s largest grocery retailer to take risks and enter tough markets where it had no competitive advantage? I don’t think so.

Annual payments

This special dividend increased in subsequent years the ordinary annual dividend to suppliers’ shareholders of 109 pence per share in cash. And that’s enough to give our £5,000 investor an extra £1,900.

That’s a total return of 92% over five years after investing in such a dull company. If they are arguably the best company in their industry in the UK, they really can pay well. Oh, I almost forgot that shareholders who invested their entire dividend in fresh Tesco shares would more than double their total investment today.

Who needs emotions when we can have tedious, dull cash cows like Tesco?

Next five years?

That doesn’t say much about the future, mind you. Tesco is once again facing familiar, aged threats. According to Kantar’s latest data, its share in the British market has reached 28.3%. But it looks like it might be stuck there. And after a few years of slightly withdrawing from the competitive scene, low-cost stores such as Lidl and Aldi are once again helping to reduce profit margins.

In October, when it released its interim results, Tesco reported an enhance in adjusted operating profit of just 1.5%. This doesn’t even reflect inflation, even though sales increased by 5.1%. Statutory operating profit fell by 0.6%. Margins are clearly squeezed by delivery costs and competition.

However, forecasts indicate an enhance in profits over the next few years. Analysts expect this all-important dividend to continue to grow. And the huge majority of them have Tesco as a purchase.

Conclusion

So yes, Tesco will face headwinds over the next five years, as it has over the last five. However, he overcame them and I see a good chance that he will be able to continue. Is this a stock to consider? As a British leader in a key sector, I believe this must be the case.