How much could $5,000 invested in Coles shares be worth in a year?

Bell Potter sees big returns on the cards for owners of this stock.

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Coles Group Ltd (ASX: COL) shares are a popular option for Australian investors.

The supermarket giant's shares feature in countless investment portfolios and superannuation funds.

But would they be a good option for investors looking to invest $5,000 into the share market this week?

Let's now take a look and see what an investment of this size could become in one year.

Investing $5,000 into Coles shares

Firstly, with Coles shares currently changing hands for $16.27, you would be able to buy 308 units with an investment of $5,011.16.

Now let's see what they could be worth in a year.

The team at Bell Potter named the supermarket giant on its panel of favoured Australian equities in April.

It notes that these are the ASX shares that its analysts believe "offer attractive risk-adjusted returns over the long term."

In addition, the broker considers "the current macro-economic backdrop and investment environment, focusing on quality companies with proven track records, capable management and competitive advantages."

In light of this, clearly it takes a lot to feature on its panel and to be classed as one of its "preferred high conviction calls."

Why this supermarket giant?

Bell Potter highlights that the company is well-positioned for the future. This is thanks to moderating costs, improvements in its supply chain and online business, and higher immigration. It said:

Costs are expected to remain elevated but should moderate through FY24 and FY25 as general inflation tapers off. In the medium term, 1) higher immigration should support grocery spending, and 2) Coles is entering a period of elevated capex intensity as it reinvests to modernise its supply chain and to catch up to competitors on online and digital offerings, which should help Coles maintain its market position.

Strong returns

The note reveals that Bell Potter currently has a buy rating and a $19.00 price target on Coles' shares.

If the Coles share price were to rise to that level, it would mean that your 308 units would have a market value of $5,852. That's almost $850 more than your original investment.

In addition, it is worth remembering that the supermarket giant shares a decent portion of its profits with its shareholders each year. The good news is that this isn't expected to change any time soon. Bell Potter is forecasting a fully franked dividend yield of 4.3%.

If the broker is on the money with its recommendation, this would mean dividends of approximately $215 over the next 12 months.

This would increase the value of your holding in the company to approximately $6,070, which equates to a market-beating return on investment of ~21%.

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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