Coles Group Ltd (ASX: COL) shares are among the most impressive S&P/ASX 200 Index (ASX: XJO) stocks for delivering passive income, in my opinion.
There's a lot to like about the consumer staples business.
The supermarket giant has exposure to food inflation, as it makes more revenue through the checkout if product prices are higher.
Everyone needs to eat food, so Coles has defensive earnings compared to many other ASX sectors. We saw during COVID-19 how essential the company is for household staples.
The ASX passive income share also benefits as Australia's rising population boosts its customer base.
With support on the revenue side of things, costs could improve as its automated warehouses come online. This should also improve efficiencies and stock flow.
Having said that, let's look at what passive income we could gain from a $10,000 investment in Coles shares.
Dividend projection
According to Commsec estimates, Coles could pay an annual dividend of 68 cents per share in FY24. At the current Coles share price of $18.15, that translates into a forward grossed-up dividend yield of 5.35%.
But the FY23 final dividend hasn't been paid yet. The projection on Commsec for the 2023 full financial year is 66 cents. This means the final dividend could be 30 cents per share, though I think Coles might pay 31 cents per share to ensure growth for shareholders.
Using the 30 cents per share projection, over the next year and a bit, it could pay 98 cents per share. That's the FY24 full-year dividend and the FY23 final dividend.
Coles shares passive income example
If we spent $10,000 on Coles shares right now, we'd be able to buy 550 of them.
That means for FY24, we could gain $374 of cash dividends and $160 of franking credits, for a total of $534 of grossed-up dividend income.
Including the FY23 final dividend, we could get $539 of cash dividends over the next 14-ish months and franking credits of $231, making $770 of grossed-up dividend income. Not bad at all. This would work out to a grossed-up dividend yield of 7.7% over 14 months.
Foolish takeaway
Coles would be one of the first ASX blue chip shares I'd choose for passive income because of its defensive earnings, growing dividend and logistics investments.
Diversification is important for a dividend portfolio, and I think Coles would be a good option away from ASX bank shares and ASX mining shares.
