This week's earnings brought us the latest numbers from two of the S&P/ASX 200 Index (ASX: XJO)'s most popular dividend stocks. On Wednesday, we heard from Woolworths Group Ltd (ASX: WOW) shares, which was followed by its arch-rival Coles Group Ltd (ASX: COL) on Friday.
Boy, was this a tale of two companies.
The market got itself into a lather on Wednesday with what Woolies had to say. Australia's largest supermarket operator reported a 3.4% rise in revenues to $37.14 billion, as well as a 24.4% increase in earnings to $1.66 billion. That enabled the company to book a net profit after tax of $859 million, up 16.4% year on year.
This prompted investors to send Woolworths shares up a massive 12.97% (I believe the largest-ever one-day gain) on Wednesday.
It was a different story entirely when it came to Coles' earnings, though.
The second-largest supermarket operator in the country reported revenue growth of 2.5% to $23.6 billion. Underlying earnings rose 10.2% to $1.23 billion, which helped the company post an underlying net profit of $676 million, a 12.5% increase.
But investors were not impressed, sending Coles stock down more than 9% at one point on Friday.
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Coles stock vs. Woolworths shares
Both Coles stock and Woolworths shares are popular amongst retirees and ASX income investors. Both companies have defensive, stable earnings bases thanks to their consumer staples nature. And both companies have long paid out decent dividends.
In the past, I've discussed my preference for Coles stock as a dividend investment over Woolworths shares. Coles usually offers a high dividend yield for one. That's thanks to both Woolworths' tendency to trade at a higher earnings multiple than that of Coles, as well as Coles' habit of paying out more of its earnings as dividends than Woolworths.
Additionally, Coles has been far more consistent when it comes to dividends than Woolworths. Since its ASX listing in 2018, the company has increased its annual dividends every single year. That's in stark contrast to Woolworths, whose own dividends have been distinctly more yo-yo-like.
But now that we have fresh dividend announcements from both companies this week, has the dynamic changed?
Which is the better ASX dividend stock?
Both Coles and Woolworths delivered good news to investors on the dividend front. On Wednesday, Woolworths revealed that its 2026 interim dividend would come in at a fully-franked 45 cents per share. That matched last year's final dividend, but represented a 15.4% rise over the 39-cent interim dividend investors bagged.
For Coles, investors learned on Friday that they are in line for an interim dividend of 41 cents per share. This dividend will also come with full franking credits attached, and represents the highest dividend Coles has ever paid out. It is a 10.81% hike from the 39 cents per share interim payout shareholders enjoyed last year.
Although both companies provided pleasing results for income investors, my preference for Coles as a dividend stock remains unchanged. The company's impressive dividend growth streak has continued, while Woolworths' dividend hike, while welcome, merely matches the interim dividend investors received in 2019.
I'm not saying that Coles shares will be a better overall investment compared to Woolworths stock going forward. But I do think Coles will serve as the better income stock.
