Coles Group Ltd (ASX: COL) shares could be a strong choice for passive income, despite the recent difficult update by the business.
At the time of writing, the Coles share price is 8% lower than where it was on 23 October 2026, as the below chart shows.
When a share price falls, it boosts the dividend yield on offer, which is useful for prospective investors.
For a defensive business like Coles, the noticeably higher dividend yield could be very appealing. If someone owns enough Coles shares, they could receive $1,200 of dividend income in 2027.
Let's take a look at what's expected of Coles' dividend in the coming financial year.
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Dividend projection
The 2027 financial year first-quarter update was challenging for the supermarket business.
In the 13 weeks to 27 September 2026, total sales were up just 2.2% to $11.2 billion and supermarket sales increased by 3.6% to $10.3 billion.
Seeing growth is positive at a time of challenging economic circumstances. But, Coles is regularly judged on how it performs against its biggest competitor – Woolworths Group Ltd (ASX: WOW).
Woolworths performed much better in its first quarter of FY27 than Coles, with 4.7% total sales growth and 6.9% Australian food (supermarket) sales growth.
Coles said that in the early part of the second quarter, cost-of-living pressures and elevated competitor promotional activity have continued to influence customer behaviour. Supermarket sales growth "moderated" compared to the first quarter of FY27. Therefore, it's lowering prices for specific products to try to win customers.
By doing that, Coles is lowering its profit margins, and so the business expects FY27 first-half supermarket operating profit (EBIT) to be in line with the first half of FY26. Coles' liquor revenue continued to fall in the second quarter of FY27.
Due to the difficult start of FY27, analysts have reduced their dividend projection. Coles is now only expected to grow its annual dividend per share by 3.5% to 80.7 cents, according to the projection on CommSec.
That translates into a forward grossed-up dividend yield of 5.1%, including franking credits, at the time of writing.
$1,200 of dividend income with Coles shares
If Coles does pay 80.7 cents per share in FY27, it would mean that an investor would need 1,487 Coles shares to generate the desired income goal of $1,200 with dividend cash during 2027.
But, fewer shares are needed if we include franking credits as part of the income target.
Including franking credits, it would take 1,041 Coles shares to generate $1,200 of grossed-up dividend income in 2027, including franking credits.
If the business does grow its dividend in FY27, it will add to its record of growing the payout every year since it started paying a dividend in 2019. That's a solid record of consistency for shareholders and makes it worth owning for passive income, in my view.
