Coles Group Ltd (ASX: COL) stock is one of the leading large ASX businesses for passive income, in my view.
Think about it, food is one of the most fundamental things that we need to live. Coles is one of the biggest food retailers in the country. Only Woolworths Group Ltd (ASX: WOW) has a larger market share in Australia.
Coles has a powerful business model which is hard to challenge with its advanced distribution centres, customer fulfilment centres, e-commerce offering and the convenience of a national supermarket network.
The company has delivered regular revenue, profit and dividend growth since it split from Wesfarmers Ltd (ASX: WES) several years ago, as it benefited from population growth, inflation and business expansion.
While its profit is not shooting higher like a tech stock, it has proven it can deliver regular financial progress, including rising dividends.
Coles is a contender for regular passive income of $250 per month or more.
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How Coles stock can deliver $250 per month of passive income
The business doesn't pay dividends every month, it pays every six months. So I think it's better to treat the goal as an annual target. $250 per month translates into $3,000 per year of passive income.
In FY26, Coles' board of directors hiked the annual dividend per share by 13% to 78 cents per share following a 13.7% rise in the underlying net profit to $1.26 billion and a 2.8% rise in revenue to $45.6 billion.
But the 2026 financial year dividend has already happened, so I think it's more useful to look at what the next annual dividend could be.
The projection on Commsec suggests the company could hike its annual dividend by 7% year-over-year to 83.5 cents per share in FY27.
At the time of writing, that works out to be a forward dividend yield of 3.5% excluding franking credits and 5% including franking credits. I think that's a solid starting point for investors looking to buy Coles shares today.
To generate an average of $250 per month, or $3,000 per year of dividend cash, it would require 3,593 Coles shares excluding franking credits.
If we include the franking credits as part of the income goal, it would require 2,516 Coles shares for the dividend cash.
If I were focused on resilient dividend income, I'd be happy to make that investment, given that its dividend has increased every year over the past decade.
Is this a good time to invest?
According to CMC Invest, there have been 11 broker ratings within the last three months, with six of those analyst ratings being a buy and five being a hold.
The average price target of those 11 ratings is $24.67, implying the Coles stock price could rise by just 3% over the next 12 months, from where it is at the time of writing. It's a solid business for passive income, but expert analysts suggest it's better to look at other ASX shares with stronger return potential.
