How substantial will the Coles dividend be in 2024?

December 29, 2023 12:00 PM PST | By Team Kalkine Media

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How substantial will the Coles dividend be in 2024? — Image source: shutterstock

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Coles Group Ltd (ASX: COL) has been a favored choice among income investors, known for its steadfast dividend payments, even during the challenging times of the pandemic. However, as investors gear up for 2024, there are indications of potential changes in the dividend landscape.

In the financial year 2023, Coles paid a fully franked dividend of 66 cents per share, providing a reliable income stream for shareholders. Looking ahead, forecasts are suggesting a modest adjustment in the dividend for the fiscal year 2024. This dividend update places Coles in focus within the context of ASX consumer stocks, as investors track the company's financial performance and anticipate potential income from their investments.

According to analysts at Citi, Coles might experience softer profits in FY 2024, leading to a projected dividend cut. The anticipated figure is a fully franked dividend of 64 cents per share, offering a 4% dividend yield based on the current Coles share price of $16.09.

While a potential dividend reduction might be a point of consideration for income-focused investors, Citi maintains a positive outlook on Coles shares. The broker has assigned a buy rating to Coles with a target price of $17.50, implying an approximately 9% upside over the next 12 months. When factoring in the 4% dividend yield, the total potential annual return becomes an appealing 13%.

It's worth noting that Citi envisions a positive trajectory for Coles' dividend beyond 2024. The forecast includes an expected rebound with dividends of 70 cents per share in FY 2025 and further growth to 79 cents per share in FY 2026. These projections translate to yields of 4.4% and 4.9%, respectively, offering a promising outlook for income-seeking investors.

As with any investment decision, potential risks and market conditions should be carefully considered, but for those eyeing reliable dividends and potential future growth, Coles remains an intriguing option in the Australian market.

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