Coles Group Ltd (ASX: COL) shares have been a popular option for income investors since their spinoff from Wesfarmers Ltd (ASX: WES).
In fact, much to the delight of its shareholders, it was one of only a handful of ASX shares that continued to pay dividends as normal during the pandemic.
This is exactly what you want when you're looking for a regular source of income from the share market.
With that in mind, what should investors expect from the supermarket giant in 2024?
Image source: Getty Images
How big will the Coles dividend be in 2024?
As a reminder, Coles paid investors a fully franked 66 cents per share dividend in FY 2023.
Unfortunately, the team at Citi appears to believe that softer profits are coming in FY 2024, which it expects to lead to a modest dividend cut.
The broker has pencilled in a fully franked 64 cents dividend for the financial year. Based on the Coles share price of $16.09, this equates to a 4% dividend yield.
And while a dividend cut might be disappointing, Citi doesn't think it should put you off investing in Coles shares today. In fact, it sees plenty of upside for investors that buy in at current levels.
According to a recent note, the broker has a buy rating and a $17.50 price target on its shares. This implies a potential upside of approximately 9% for investors over the next 12 months. And if we throw in the 4% dividend yield, it stretches the total potential annual return to an attractive 13%.
It is also worth noting that Citi believes that Coles' dividend will return to growth the year after. It has pencilled in 70 cents per share in FY 2025 and then 79 cents per share in FY 2026. This represents yields of 4.4% and 4.9%, respectively, for investors.
