Why is the Coles share price sinking today?

Something is going on with this supermarket giant's shares on Thursday…

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Confused woman at a supermarket.

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Key points

  • Coles shares are taking a tumble on Thursday morning
  • This decline is related to its upcoming dividend
  • Last month Coles released its half-year results and revealed a 9.1% increase to its interim dividend

The Coles Group Ltd (ASX: COL) share price is under pressure on Thursday morning.

At the time of writing, the supermarket giant's shares are down 3% to $17.46.

What's going on with the Coles share price?

The good news for investors is that the Coles share price decline today isn't due to a bad update or a broker downgrade.

Rather, it is due to the company's shares trading ex-dividend this morning for its upcoming interim dividend.

When a share trades ex-dividend, it means the rights to the impending dividend payment remain with the seller and don't transfer to the buyer.

As a result, a share price will often drop in line with the dividend to reflect this. After all, you wouldn't want to pay for something you won't receive.

The Coles dividend

Last month, Coles released its half-year results for FY 2023 and reported a 3.9% increase in sales from continuing operations to $20.8 billion.

And thanks to significant margin expansion from Smarter Selling benefits and lower COVID costs, the company delivered a 17.1% jump in net profit after tax to $643 million.

This ultimately allowed the Coles board to declare a fully franked interim dividend of 36 cents per share, which was an increase of 9.1% over the prior corresponding period.

Coles shares have now gone ex-dividend for this today and eligible shareholders can look forward to receiving it in their bank accounts later this month on 30 March.

What's next?

Looking ahead, the team at Morgans is expecting a 30 cents per share fully franked final dividend in August, bringing its full-year dividend to a total of 66 cents per share.

After which, the broker is expecting the supermarket operator to maintain its dividend at this level in FY 2024.

Motley Fool contributor James Mickleboro 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 Coles Group. 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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