Can Coles shares deliver 13% growth AND tasty dividends this year?

We see what the experts are saying about the grocer's outlook.

Sebastian Bowen

Author Bio Sebastian Bowen has been a Motley Fool contributor since late 2018. Sebastian found his passion for writing and educating others about shares and all things finance after completing his studies in political, economic and social science and enjoys bringing this passion to life at the Fool. His investment philosophy is a simple one – buying high-quality companies at prices that make sense. When he’s not researching his next investment at all hours of the morning, Sebastian enjoys classic movies and likes to unwind with a good book, newspaper or record. Areas of Expertise Dividend investing ETFs Education Bachelor of Political, Economic, and Social Sciences (Government and International Relations), University of Sydney Social Media X/Twitter Favorite Investment Quote "In the short run, the market is a voting machine, but in the long run, it is a weighing machine." – Benjamin Graham

Published August 13, 2022 7:30 am AEST

Coles Group Ltd (ASX: COL) shares have been a pleasing investment to have held in recent months. Just take yesterday. The S&P/ASX 200 Index (ASX: XJO) closed 0.54% lower. But the Coles share price went the other way, adding 0.48% to $18.81 a share.

Sure, Coles has retreated from the all-time high of $19.28 a share that we saw at the start of this month. But the grocer still remains up 5% in 2022 so far, and around 3% over the past 12 months. In contrast, the ASX 200 is still nursing losses of around 7.5% for both of these periods.

But is there still gas in the tank for Coles shares after these periods of outperformance?

Well, if you ask one ASX broker, the answer is a decisive 'yes'.

Woman thinking in a supermarket. — Image source: Getty Images

Coles shares picked as a buy by ASX experts

My Fool colleague James covered the opinions of ASX broker Citi earlier this week. Citi has recently retained its "buy" rating on the company and lifted its 12-month share price target to $21. if this came to pass, it would represent a potential upside of around 12% from where Coles is today.

Citi reckons Coles will enjoy boosted sales over FY 2023 thanks to the effects of rising inflation. This broker is also pencilling in a big lift in dividends to 75 cents per share for FY 2023, up from an expected 65 cents for FY 2022. Coles has already lifted its dividends substantially in recent years.

As my Fool colleague Brooke noted this week, Coles doled out 35.5 cents per share for FY 2019, 57.5 cents per share for FY 2020 and 61 cents for FY 2021.

If the supermarket operator indeed lifts its dividends to 75 cents per share for FY 2023, it would represent a forward yield of just over 4% (or 5.72% grossed-up with Coles' typical full franking credits) at today's pricing.

But Citi isn't the only expert investor eyeing off the grocer right now. As we also covered this week, Dr Philipp Hofflin from Lazard Asset Management picked Coles as an ASX share that could be held in a difficult economic environment. This was due to the company's lack of debt and "strong" balance sheet.

So it seems that more than one ASX expert is bullish on Coles' future today. No doubt investors will welcome that news.

At the current Coles share price, this ASX 200 blue chip share has a market capitalisation of $25.05 billion, with a trailing dividend yield of 3.25%

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