The Coles share price rises above $16! Is this my time to buy?

Is it too late to buy Coles shares in 2024?

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The Coles Group Ltd (ASX: COL) share price has had a bit of a rally in recent weeks. It was only this time last month that the supermarket giant was asking well under $16 a share, $15.74 to be exact. But fast forward to the present, and Coles shares are well over $16. 

In fact, the ASX 200 consumer staples stalwart is trading for $16.16 a share at the time of writing, having lost 0.55% today, but still up 2.7% over the past month.

I've long eyed off Coles shares as a potential dividend investment. After all, this company has shown a remarkable ability to fund clockwork-like annual dividend pay rises to its shareholders over the past four years. That's not something that Coles' arch-rival Woolworths Group Ltd (ASX: WOW) can claim.

So now that Coles is over $16, will I be buying some shares?

Am I buying the Coles share price at $16?

Well, let's get this out of the way. The fact that Coles shares are rising in value makes the company less attractive to me as an investment, not more. I like buying shares at a discount to their true value.

And regardless of what the 'true value' of Coles shares is, a 3% rally over a month means that Coles is now 3% more expensive than it was in early December.

So I'm less inclined to buy the company today than last month.

Back in October, Coles shares actually fell below $15 each, as you can see below:

That would be closer to the levels I would consider to be a compelling investment.

Don't get me wrong, I think Coles shares remain attractive today, especially for income-focused investors. The company continues to grow at a healthy rate, with revenue up 5.9% over FY2023 to $40.5 billion.

Yet Coles shares are still trading on a relatively cheap price-to-earnings (P/E) ratio of 20.4. And you could certainly do a lot worse than its 4.08% fully-franked dividend yield that the company closed at yesterday.

But I'll be waiting until Coles is at least back under $15 a share to buy, not over $16 as it is today.

Motley Fool contributor Sebastian Bowen 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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