Owning Coles Group Ltd (ASX: COL) shares could be a wonderful pick for dividend income in the years ahead because of their stability and growth.
Coles is best known for its supermarket business, the second-largest operator in Australia. It also has a liquor division which includes Coles Liquor and Liquorland, a 50% stake in Flybuys, and it offers financial products like insurance, credit cards and personal loans.
Given that food is a life essential, I think Coles is one of the leading ASX defensive shares in Australia. Australia's steady population growth is a key driver of demand for Coles' products.
I think Coles is one of the leading ASX blue-chip shares because of its track record of growing its payout and delivering a solid dividend yield.
Let's take a look what could happen with a $6,000 investment in Coles shares.
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Strength of the dividend
Coles spun off from Wesfarmers Ltd (ASX: WES) more than seven years ago. Since then, the supermarket business has increased its annual dividend every year. None of Australia's largest businesses can say that they have done the same – COVID-19 impacts, lower commodity prices, or inflation led to dividend cuts this decade for many of the large ASX shares.
Coles has kept things consistent, and shareholders' bank accounts have benefited.
The ASX blue-chip share generated underlying net profit after tax (NPAT) growth of 13.7% to $1.25 billion in FY26, helping fund a 13% increase in the annual dividend per share to 78 cents per share.
At the time of writing, the FY26 payout translates into a grossed-up dividend yield of 4.8%, including franking credits. But, that's the past. Any investors buying Coles shares will receive the 2027 financial year dividend next, so we should focus on that.
Excitingly, the payout is forecast to increase again in FY27. According to CommSec's projection, the ASX blue-chip share is expected to pay an annual dividend of 83.5 cents per share. That would be year-over-year growth of 7%, much stronger than inflation.
That projected payout for FY27 would also represent a forward grossed-up dividend yield of 5.2%, including franking credits.
$6,000 investment in Coles shares
If someone were to buy $6,000 of Coles shares today, they'd be able to buy 260 Coles shares.
That could mean dividend cash of $217.10 from FY27 and grossed-up dividend income of $310.14 including franking credits.
If I were looking for dividend income from an ASX blue-chip share, Coles would be a strong contender. But it's not the only business I'd look at today for returns.
