Why the Coles share price just hit a new record high

The Coles Group Ltd (ASX: COL) share price just hit a new record high. Is Coles a buy today, perhaps for ASX dividend income?

| More on:
man walking up line graph, into clouds, representing asx shares at an all time high

Image Source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Coles Group Ltd (ASX: COL) share price has hit a new record high today. The company's shares started off the trading day at $18.85, just below the previous record high of $18.99. But the Coles share price shot the lights in the few hours after open and stormed past $19 to print a new record high of $19.16 just after midday. Since then, it seems to have cooled off somewhat and was going for $18.97 at the market's close.

It's been a topsy-turvy year for the ASX's second-largest grocer. Between 1 January and 14 May, the Coles share price was essentially flat, despite the broader S&P/ASX 200 Index (ASX: XJO) going on a wild ride in the meantime, which included a ~35% plunge. But since 22 May, the Coles share price really took off, rising more than 26% as of today's pricing.

It seems like an eternity ago that Coles was spun-off from its old parent company Wesfarmers Ltd (ASX: WES) for $12.49 back in November 2018. Given that any Wesfarmers shareholder who kept their issued Coles shares is now up around 52% in 18 months, it has to go down as one of the most successful spin-offs in recent times. Also, consider that Wesfarmers shares are up almost 50% on their own accord over the same period as well.

Why is the Coles share price hitting the roof?

There has been no major news out of the grocery giant this week, so we can probably put today's new record high down to some good old-fashioned earnings expectations fever. Coles is due to report its full-year results on 18 August (next Tuesday). It will no doubt be reporting something of a mixed bag. It's likely (in my opinion) that sales will still be up as a result of the coronavirus pandemic, not to mention the second lockdown that is unfortunately afflicting Victoria right now.

On the other hand, it's also likely that the company will be carrying some extra costs associated with the pandemic, such as cleaning expenses, increased staff sick leave and in-store protective measures like cashier barriers.

Clearly, investors are betting that the former will outweigh the latter next week if today's Coles share price is anything to go by.

Should you buy today?

Looking at the Coels share price right now, I don't see much I like. I think the shares are fairly valued at best, if not a little expensive. With a price-to-earnings (P/E) ratio of 21.34 and a trailing dividend yield of 2.21%, I don't see much upside from either a growth or income perspective.

Saying that, I recognise that the relative safety of Coles' dividend is still attractive in a year that has been defined by dividend cuts. So if you want to add or top up your Coles shares within a diversified dividend portfolio, go for it.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

Three people in a corporate office pour over a tablet, ready to invest.
Broker Notes

Top brokers name 3 ASX shares to buy today

Here's what brokers are recommending as buys this week.

Read more »

Senior man wearing glasses and a leather jacket works on his laptop in a cafe.
Broker Notes

Should I still swap my CSL for CBA shares or has the market corrected?

The two stocks have travelled opposite directions this month.

Read more »

Man with rocket wings which have flames coming out of them.
Resources Shares

Why Macquarie expects this ASX All Ords copper stock could surge 38%

With costs coming in below expectations, this ASX All Ords copper stock could rocket higher over the coming months.

Read more »

woman holding 'hiring' sign in shop
Broker Notes

Can you guess whether Macquarie prefers REA Group, CAR Group or SEEK shares?

Which ASX online classifieds business offers the best investment opportunity today?

Read more »

An ASX shares broker analysing a chart tracking the A2 Milk share price
Share Market News

Are these two struggling ASX materials shares undervalued?

Are these buy-low candidates?

Read more »

Female miner smiling in front of a mining vehicle as the Pilbara Minerals share price rises
Broker Notes

Expert says this ASX All Ords small cap mining stock could rocket 38%

Big upside ahead?

Read more »

Happy man working on his laptop.
Share Market News

5 things to watch on the ASX 200 on Wednesday

It looks set to be another good session for Aussie investors tdaoy.

Read more »

Two laughing young women hold shopping bags and ride an escalator up to another level in a Scentre Group shopping centre.
Broker Notes

3 ASX consumer sector shares to buy in July: expert

A leading expert has named its top 3 picks.

Read more »