Are Coles shares an August dividend buy?
The post Should you buy Coles (ASX:COL) shares in August for the dividend yield? appeared first on The Motley Fool Australia. –
Since becoming its own ASX 200 listing back in late 2018, the Coles Group Ltd (ASX: COL) share price has become known as an ASX dividend heavyweight. Being a large, mature blue chip ASX company, this probably wouldn’t have been much of a surprise.
After all, even before Coles’ ASX listing, its arch-rival Woolworths Group Ltd (ASX: WOW) had been paying its shareholders with hefty, fully franked dividends for decades. It wasn’t a stretch to see Coles pursuing a similar path.
But now we have put a few years between Coles’ spin-off from its old parent company Wesfarmers Ltd (ASX: WES), it’s probably a good time to assess how Coles is tracking in the dividend department. So exactly what kind of dividends is Coels offering its investors this August?
Well, it’s first worth noting that Coles is scheduled to report its FY2021 earnings in exactly a week’s time (18 August). We’ll probably hear what kind of dividends investors can expect from Coles later this year from the company’s management then.
But let’s go with what we do know today. So Coles’ last two dividend payments came in at 33 cents a share (the March 2021 interim payout) and 27.5 cents per share (the September 2020 final dividend).
Together, these two payouts come to a total of 60.5 cents per share for the previous 12 months. That gives Coles a trailing dividend yield of 3.33% (or 4.76% grossed-up with full franking) on the current Coles share price.
Not bad for Coles shareholders, especially considering Woolworths’ trailing dividend yield stands at 2.51% today.
But what of the future?
Are Coles shares a buy for dividends this August?
Well, as I stated, we don’t yet know for sure. But one broker has given it a ‘best guess’. Investment bank Goldman Sachs. Goldman currently rates the Coles share price as a ‘buy’, with a 12-month share price target of $19.40 a share, implying a potential upside of 6.65% on the current Coles share price.
When it comes to dividends, Goldman is also bullish. The broker reckons that Coles will be able to keep raising its dividend over the next few years. It is estimating a potential dividend payout of 62 cents per share for FY2022, growing to 73 cents per share by the 2023 financial year.
No doubt Coles shareholders will be hoping Goldman is right!
At the current Coles share price, the compnay has a market capitalisation of $24.1 billion
Should you invest $1,000 in Coles right now?
Before you consider Coles, you’ll want to hear this.
Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Coles wasn’t one of them.
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*Returns as of May 24th 2021
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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COLESGROUP DEF SET and Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.