If you’re a retiree, you might be looking for a way to generate an income after the rates on traditional interest-bearing investment products tumbled over the last few years.
How can retirees overcome low interest rates?
One way you can overcome low interest rates is by investing in dividend shares. Luckily, the Australian share market is home to a large number of them. But which ones should you buy?
One to consider is Coles Group Ltd (ASX: COL).
This supermarket giant could be a top option for retirees. This is due to Coles’ strong market position, solid growth prospects, and defensive qualities.
Combined, these are expected to lead to the company delivering consistently solid earnings and dividend growth over the long term.
That certainly looks set to be the case in FY 2021 after a very strong first half result. For the six months ended 31 December, Coles reported an 8% increase in revenue to $20,569 million and a 14.5% lift in half year net profit to $560 million.
Goldman Sachs rates Coles shares as a buy
Goldman Sachs believes Coles would be a good long term option for investors. This is thanks partly to its Smarter Selling cost out program and its focus on automation.
The broker also sees a lot of value in its shares at the current level. It has a buy rating and $20.70 price target on them. In addition to this, Goldman is forecasting a 62 cents per share fully franked dividend for FY 2021.
Based on the current Coles share price of $15.51, this represents potential upside of 33% and a 4% dividend yield. That’s a potential total return of 37% over the next 12 months.
Where to invest $1,000 right now
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*Returns as of February 15th 2021
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.