I'd definitely describe Coles Group Ltd (ASX: COL) as one of the leading ASX dividend stalwarts that Australians can buy.
When I think about which businesses would make excellent ideas for long-term income, there are three elements that are important, in my view.
Firstly, I'd want to see rising earnings. Second, rising dividends. Third, a good starting dividend yield. Let's run through each of those for Coles.
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Rising earnings
If a company's (underlying) net profit isn't going up, then there's a much higher chance that the payout may be reduced.
I wouldn't expect too many ASX businesses to be capable of delivering growing profits most years over the ultra-long-term, but Coles could be one of them.
As a retailer of food, the company has a very important role in Australian society. A growing population means more mouths to feed and more potential customers for the supermarket business.
Coles is currently delivering more sales growth than Woolworths Group Ltd (ASX: WOW), showing that its offering is resonating with customers.
Sales growth is a key input for delivering earnings growth, with the company's expanding scale helping with operating leverage.
It's particularly exciting to see that the company's new, huge, automated distribution warehouses are complete. This will help with efficiencies, stock flow, food freshness and margins, in my view. This could be a helpful boost to the company's bottom line over the next two financial years.
The projection on Commsec suggests the business could deliver earnings per share (EPS) of 92.6 cents in FY26, 99.4 cents in FY27 and $1.148 in FY28. For the foreseeable future, the outlook seems right for Coles.
Growing payouts from the ASX dividend stalwart
Rising earnings can likely translate into dividend hikes for shareholders. Coles has increased its annual payout each year since it listed seven years ago.
For investors relying on these dividend payments, it's pleasing to see the payout rising over time because it can protect against headwinds in a household's budget.
The bigger payouts help us feel wealthier and give us more cash to spend (or invest in more shares).
Most importantly, I want to have a high level of confidence that the business is capable of delivering bigger payouts even during nationally difficult economic times.
So far, Coles has delivered dividend growth through COVID-19 and the high inflation period.
The forecast on Commsec suggests the business could grow its payout in FY26, FY27 and FY28.
Good starting dividend yield
While the dividend yield isn't everything, I would say that it's important because income investors are choosing this ASX dividend stalwart over having a term deposit. Australians probably want a good level of passive income straight away.
In the 2025 financial year, the business decided to declare an annual dividend per share of 69 cents. That's a grossed-up dividend yield of 4.8%, including franking credits. The projected payout for FY26, according to Commsec, would translate into a grossed-up dividend yield of 5.5% (including franking credits) at the time of writing.
