Do Coles shares offer a dividend reinvestment plan?

Coles is a popular dividend share on the ASX. But can investors reinvest their dividends?

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Since debuting on the ASX under its own name and steam back in 2018, Coles Group Ltd (ASX: COL) wasted little time establishing its dividend credentials. For years now, Coles shares have paid out hefty dividends. This is a company that hasn’t yet missed a half-yearly dividend payment, and has grown its dividends from 57.5 cents per share in 2020 to 61 cents per share last year. On current pricing, Coles shares now have a dividend yield of 3.3%.

But do Coles shares offer a dividend reinvestment plan (DRP or DRIP) alongside these dividends? That’s what we’ll be checking out today.

So many ASX 200 blue-chip shares offer investors the choice of a DRP when receiving dividends. Normally, a dividend is paid out in cash to investors. But if a company offers a DRP, it means that investors have the option to either receive the dividends in cash, or instead receive the value of the dividend payment in the form of new shares. Many investors like to have this option, as it can easily set up a potent compounding effect.

But do Coles shares give investors this option?

Do Coles shares offer income investors a DRP?

Well, the answer is a resounding yes. Coles currently does operate a DRP for its dividend payments.

Here’s how Coles describes its DRP:

If you elect to participate in the DRP, you will be able to reinvest either all or part of your dividend payments into additional fully paid Coles shares in an easy and cost-effective way. No brokerage, commission or other transaction costs will be payable by you on shares acquired under the DRP.

This DRP has been in place since Coles’ first dividends were paid out in 2019. However, the company typically doesn’t offer a discount when investors elect the DRP and receive new shares in lieu of cash.

So Coles investors do have options when it comes to the dividends the company pays out. Something to keep in mind if an investor owns Coles shares.

At the current Coles share price, this ASX 200 blue-chip share has a market capitalisation of $24.77 billion.

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 has positions in and has recommended COLESGROUP DEF SET. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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