I believe owning Coles Group Ltd (ASX: COL) shares is a great option for dividends because of both its consistently rising passive income and the size of the dividend yield.
On top of the pleasing dividend, Coles has a defensive earnings base – we all need to eat, of course.
The business has grown its dividend each year since it was listed several years ago, and we're going to take a look at how large the dividend could grow in the coming years.
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FY26
Coles has started FY26 strongly, in the first quarter of FY26, it delivered group total sales revenue of $10.96 billion, representing 3.9% growth – this beat UBS' expectations.
Broker UBS said that Coles supermarkets are executing strongly and leveraging key investments.
Those investments include Witron automated distributed centres, which are improving product availability in NSW and Queensland. Ocado customer fulfilment centres (CFCs) helped drive 28% online sales growth in the FY26 first quarter.
UBS also pointed out that Coles supermarkets are delivering ongoing promotional effectiveness, which are fewer and better, and product ranging is better (which is increasingly store-led), according to UBS. Both of these advantages have been enabled by the supply chain.
With the effective execution of its strategy, UBS is projecting that the business could decide to pay an annual dividend per share of 79 cents following an increase of the company's net profit.
If Coles does decide to pay that projected amount, it would mean a grossed-up dividend yield of 5.2%, including franking credits.
FY27
The company could see further dividend growth in the 2027 financial year, thanks to the strength of its revenue and net profit.
UBS is forecasting the business could grow its dividend to a pleasing 93 cents per share in FY27. If that comes true, it would translate into a grossed-up dividend yield of 6.1%, including franking credits, at the current Coles share price.
FY28
The 2028 financial year could get even better for owners of Coles shares.
In FY28, the board of directors of Coles is projected by UBS to declare an annual dividend per share of 97 cents. If that happens, the business could have a grossed-up dividend yield of 6.3%.
FY29
The broker is projecting that the business could deliver more profit and dividend growth for investors in FY29. UBS is currently suggesting the Coles annual dividend per share could climb to $1.01.
If that happens, Coles would deliver investors a grossed-up dividend yield of 6.6%, including franking credits, using the valuation at the time of writing.
FY30
The final year of this series of projections is expected to see the biggest dividend of all.
UBS forecasts that Coles may deliver investors an annual dividend per share of $1.04. That means the business could provide a grossed-up dividend yield of 6.8%, including franking credits.
