Of all the stocks on the S&P/ASX 200 Index (ASX: XJO), I reckon Coles Group Ltd (ASX: COL) shares are in the top tier for best buys for 2023 right now.
Sure, Coles is highly unlikely to shoot the lights out over the next few years and give investors life-changing returns. But I think most investors shouldn't be aiming for that kind of outcome anyway. So today let's discuss there reasons why Coles would be a solid buy for any investor today.
3 reasons to buy Coles shares right now
Coles is a highly defensive ASX share
When I think of the ASX 200's most defensive stocks, Coles is one that immediately comes to mind. Coles is a consumer staples stock, selling food, drinks and other household essentials. Furthermore, it is universally recognised as one of the cheapest places to buy these types of goods in the country. This gives Coles' business a huge advantage.
We all need to constantly eat, drink, and keep our households clean and tidy. As such, there is almost nothing that will stop us from shopping at Coles to meet these ends. That includes recessions, depressions, pandemics, inflation, and deflation.
So no matter the economic weather, this company will always have an incredibly robust earnings base from which to source profits and pay dividends. That gives me enormous confidence in Coles shares as a long-term investment.
Fat, fully franked dividends
Speaking of dividends, and we have another reason to consider Coles as an investment. For starters, the company's current dividend yield is fairly attractive by ASX standards. Right now, the company offers a trailing dividend yield of 3.7%. That comes with full franking credits too.
But what I'm most impressed about Coles' dividends is this: in the near-five years Coles has been listed on the ASX, it has made a habit of giving investors an annual dividend pay rise. That includes during COVID-ravaged 2020. That year, Coles upped its dividends from 2019's 35.5 cents per share to 57.5 cents per share. By 2022, this had been ratcheted up again to 63 cents per share.
Of course, we'll have to wait until 22 August to see what 2023's total dividends will come in at. But seeing as Coles already lifted its interim dividend from 33 cents in 2022 to 36 cents this year, signs are looking promising.
This is a cheap ASX 200 stock
A final consideration for Coles shares today is their relatively cheap share price. As it presently stands, Coles is trading on a price-to-earnings (P/E) ratio of 21.51. For one, that is considerably cheaper than many other ASX blue-chip shares right now. For example, Telstra Group Ltd (ASX: TLS) currently has a P/E ratio of 26.81.
But Coles looks cheaper still compared to its arch-rival Woolworths Group Ltd (ASX: WOW). At present, Woolies shares trade at more than a 30% premium to Coles, with Woolworths' P/E ratio of 28.01. WOW indeed. Now while Woolies might be a slightly superior business to that of Coles, I would much rather buy Coles shares right now at this 30% discount to its rival.
