The S&P/ASX 200 Index (ASX: XJO) stock Coles Group Ltd (ASX: COL) could be one of the most compelling blue-chip shares to own over the longer-term for passive income.
Coles is widely known for its national supermarket chain, though it also generates earnings from other businesses including liquor (Coles Liquor, Liquorland, First Choice Liquor Market and Vintage Cellars), financial services and a 50% stake in Flybuys.
The company has an important role in Australia – we all need to eat and drink, so it's defensive.
But, it also has offers a pleasing level of passive dividend income and it has an increasingly impressive dividend income.
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The ASX 200 stock's dividend credentials
A lot of ASX 200 shares that pay dividends have given investors a dividend cut since the onset of COVID-19.
Banks cut their dividends following a large increase in their provisions for bad debt as well as regulators wanting them to hold more capital.
ASX iron ore shares have also seen dividend cuts in recent times because of a drop in the iron ore price.
Coles has managed to consistently increase its payout each year since 2019 when it first started paying a dividend following the demerger from Wesfarmers Ltd (ASX: WES).
So, its dividend record is one of resilience for shareholders.
In terms of the next dividends in the 2026 financial year, the forecast on Commsec suggests the business could increase its annual dividend per share to 79.8 cents. At the current Coles share price, that translates into a potential grossed-up dividend yield of 5.2%, including franking credits, or 3.6% excluding franking credits.
How to generate $2,500 of annual passive income
If we exclude the bonus of franking credits, we'd need to own 3,133 Coles shares.
The ASX 200 stock does attach franking credits, so if we're including that as part of the income, then an investor would need to own 2,193 Coles shares.
Dividend growth is certainly not guaranteed, but I think it's looking likely in FY26 thanks to a couple of key positives.
Firstly, the company's automated distribution centres (ADC) and customer fulfilment centres (CFCs) are now fully operational, meaning the company can benefit from the increased efficiencies, stock flow and cost savings they'll provide in FY26 (and beyond).
Secondly, the trading update for FY26 to date was promising. In the first quarter of FY26, total sales were up 3.9%, with supermarket sales up 4.8%. In the early part of the second quarter, supermarket sales revenue growth "remained at similar levels to the first quarter".
Overall, this bodes well for future passive dividend income growth, in my opinion.
