Owning Coles Group Ltd (ASX: COL) shares has been a smart pick for passive income over the last several years with both a pleasing dividend yield and a rising payout.
I'll always advocate for income-focused investors to invest in stocks that are more likely than average to maintain or increase the payout. If someone is investing for passive income, particularly if they're relying on it, they may want to have a sense of safety that the payments are likely to continue flowing.
Coles could be one of the most defensive businesses on the ASX with its national store networks of Coles supermarkets and liquor stores. Its liquor businesses include Coles Liquor, First Choice Liquor Market, Liquorland and Vintage Cellars. Coles also owns half of Flybuys and it offers certain financial services including insurance, credit cards and personal loans.
If an investor were considering investing thousands of dollars into Coles shares, let's look at how much passive income it could provide.
Coles dividend forecast for FY26
The business has increased its annual payout each year since FY19 and it's expected to grow again in FY26.
Analysts are projecting a potential payout of 78.8 cents per share in the 2026 financial year, which would represent a year-over-year increase of 14%. I'd be very happy with that level of dividend growth as a shareholder.
If the business does pay that level of income, it would be a dividend yield of 3.7%. With franking credits, that's a grossed-up dividend yield of around 5.25%, which is comfortably more than what bank savings accounts are offering right now.
If someone were to invest $8,000 into Coles shares, that would mean being able to buy 374 Coles shares. This would create almost $295 of cash dividends and $421 of grossed-up dividend income, including the franking credits.
I think that's a very good level of passive income from an investment that can provide resilient income. The projection on Commsec suggests the business could increase its payout to 84.5 cents per share in FY27 and 97.6 cents per share in FY28.
Is this a good time to invest in the business?
Analysts generally have a positive view on Coles shares. According to a collation of analyst opinions on the business, there are currently 10 buy ratings on the business and seven hold ratings. Thankfully, there are no selling ratings on the company.
In my opinion, I think this is a good time to invest in the business with ongoing population growth and resilient employment. A lower Coles share price is also appealing – it's down around 10% since August 2025.
