If you are on the lookout for a source of passive income, then the ASX dividend superstar in this article could be worth considering.
It has been growing its dividends for a number of years and looks well-placed to continue doing so long into the future.
Which ASX dividend superstar?
The ASX dividend share in question is Coles Group Ltd (ASX: COL).
It is of course one of Australia's big two supermarket operators and the owner of a large alcohol retail network across brands such as Vintage Cellars and Liquorland.
Since being spun off from Wesfarmers Ltd (ASX: WES) in 2018, Coles has been a consistent dividend payer. In fact, it was one of only a handful of companies that were able to pay dividends as normal during the COVID-19 pandemic.
It is these defensive earnings that arguably make it an ASX dividend superstar.
$5,000 of passive income
If you wanted to generate $5,000 of passive income from Coles shares, you would need to make a large investment.
According to a note out of Bell Potter, its analysts are forecasting Coles to pay a fully franked 68 cents per share dividend in FY 2025.
This means that you would need to own 7,353 Coles shares to generate the desired amount of passive income over the next 12 months.
And with Coles shares currently changing hands for around $18.00, an investment of $132,354 would be required.
Should you invest?
Let's imagine that you're fortunate to have that amount of capital free to invest into this ASX dividend superstar. Would it actually be a good idea?
Bell Potter believes it would be. In fact, late last month the broker initiated coverage on the supermarket giant's shares with a buy rating and $21.55 price target. This implies potential upside of approximately 20% for investors from current levels.
This means that if Bell Potter is on the money with its recommendation, your 7,353 Coles shares would have a market value of $158,457 this time next year.
That's approximately $26,000 greater than your original investment and doesn't include the $5,000 of passive income you would receive from its dividend payments.
Commenting on its buy rating, the broker said:
We initiate coverage with a Buy rating. While we see FY25e as a year of consolidation on a reported basis, we see COL as providing an attractive earnings growth profile through to FY27e on an underlying basis, with high levels of cash generation supporting growth in dividends. In addition, at 9.1x FY25e EBITDA, COL continues to reflect relative value compared to WOW (~5% discount).
