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Highlights
- Coles shares up 18.2% in 2024, with a 21% growth over the past 12 months.
- The company’s dividend yield for 2024 stands at a healthy 4.32%.
- Two brokers project potential further growth, with target prices of AUD19.50 and AUD20.50.
Coles Group Ltd (ASX:COL) has had an exceptional year in 2024, rewarding shareholders with strong returns. Starting the year at AUD16.11 per share, Coles shares have risen by 18.2% to AUD19.03 as of December. Over the past 12 months, Coles has seen an even more impressive 21% gain, rising from AUD15.74 a share this time last year.
This solid performance has been driven by strong business fundamentals and a steady track record of growth. Alongside this, Coles has provided substantial dividend income to investors, with a payout of 68 cents per share for the 2024 year—up from 66 cents in 2023. For someone who purchased shares a year ago, this dividend income translates to a 4.32% yield, a healthy return for those seeking both capital growth and passive income.
Ord Minnet's Positive Outlook
Ord Minnet, one of Australia's leading brokers, recently raised its rating on Coles from "hold" to "accumulate," following the company’s strong performance in the September quarter. In its note, Ord Minnet highlighted Coles’ impressive execution and disciplined cost management, which helped the company achieve healthy sales growth for the first quarter of FY25. Additionally, Coles’ tight control over capital expenditure (capex) is expected to result in strong free cash flow (FCF) and higher dividends.
Looking beyond FY25, Ord Minnet remains optimistic about Coles' future earnings, particularly with several growth drivers in place for FY26. The broker also noted that Coles is trading at a 16% discount to its main competitor, Woolworths (WOW), making the stock an attractive option. Ord Minnet has set a 12-month price target of AUD19.50, indicating a small potential upside from its current price.
Bell Potter’s Long-Term Confidence
Bell Potter also remains positive on Coles, noting that the company offers an attractive earnings growth profile through to FY2027. Bell Potter expects Coles to continue increasing its dividend over the next few years, reaching 86 cents per share by FY2027. This anticipated dividend growth adds to the appeal of Coles shares as a stable, income-generating investment.
Bell Potter’s 12-month price target for Coles is AUD20.50, suggesting further upside potential of approximately 8% from the current share price. Given Coles’ strong fundamentals and solid growth prospects, Bell Potter remains bullish on the stock.
While Coles shares have risen substantially this year, analysts still see potential for further gains, with target prices of AUD19.50 from Ord Minnet and AUD20.50 from Bell Potter.
