Owning Coles Group Ltd (ASX: COL) shares has been a smart choice for passive income over the last several years and it could continue to be appealing for the foreseeable future. It could be a good option for significant, resilient dividend payouts.
Coles is the second-largest supermarket business in Australia. It also has several other businesses, including Coles Liquor, Liquorland, Coles Financial Services, and a 50% stake in Flybuys.
Given how defensive supermarket earnings are, I think the business can provide consistent dividends, which many investors may appreciate in today's environment.
Let's take a look at what it would take for unlock $10,000 of annual passive income.
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How many Coles shares do I need to buy for $10,000 of passive income?
Coles paid its first dividend as a separate business in 2019 and it has increased its annual payout every year since then. Not many ASX blue-chip shares can say they've increased their payout every year since 2019 – many cut their payouts in 2020 or in one of the more recent years.
I expect the business to continue that trend of rising payouts in FY26 and beyond. In the FY26 half-year result, Coles' board of directors decided to increase the payout by more than 10% to 41 cents per share. With that dividend hike already banked, I think it's very likely the business can report a larger payout for its FY26 annual dividend.
The Commsec projection suggests the business could increase its payout in FY26 to 75.5 cents per share. That translates into a grossed-up dividend yield of 4.4%, including franking credits, at the time of writing.
But I think we should focus on FY27 because that's the financial year we're currently in, and it's what investors can look forward to over the next year or so.
The forecast on Commsec suggests the business could hike its annual dividend per share to 82 cents per share in FY27, which translates into a grossed-up dividend yield of 4.8% (including franking credits) at the time of writing.
To receive $10,000 of passive income in FY27, an investor would need 12,196 Coles shares, if we exclude franking credits. If we include the franking credits as part of the passive income, it would require 8,537 Coles shares.
Is it time to buy?
According to Commsec's collation of analyst opinions, there are 16 analyst ratings on the business. Eight of those ratings are buy, six are hold, and two are sell.
Therefore, professional investors are leaning positive rather than negative, but there are other ideas that experts are even more positive about.
