3 reasons why Coles (ASX:COL) is a top ASX dividend share

Here are 3 reasons that Coles Group Ltd (ASX: COL) is a top ASX dividend share for income investors today. Strong dividend growth is one…

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The Coles Group Ltd (ASX: COL) share price is having a pretty happy day today. Coles shares are up 1.6% to $16.52 at the time of writing. As all good dividend investors would know, higher share prices equal lower dividend yields. And with today's move, the trailing dividend yield investors can expect from new Coles shares is now at 3.66%.

But Coles can still be considered a great ASX dividend share. Here are 3 reasons why

3 reasons Coles is a top ASX dividend share

Dividend safety

Coles is a consumer staples company. It mostly sells products that we need, rather than want. That's food, drinks and household essentials, as well as tobacco and alcohol. These products are highly inelastic, essentially recession-proof, and extremely resilient to any other form of economic malady. That includes inflation too. All of these factors make Coles' revenue and earnings very stable which in turn, makes Coles' dividends stable. We saw this in play last year. While most ASX blue chip shares like the banks were slashing dividends, Coles managed to raise its own. And that leads us to our second point…

Coles' dividend is growing

In the few years since finding its ASX independence from its old parent Wesfarmers Ltd (ASX: WES), Coles has proven itself to be a strong ASX dividend growth share. Its final dividend from 2019 came in at 24 cents a share. Its interim dividend in 2020 was 30 cents per share. Contrast that with its last final and interim dividends, which were 27.5 cents and 33 cents a share respectively. That's an average growth rate of 12% per annum. There are not too many ASX dividend shares out there that have even kept their dividend steady over 2019-2021 including Woolworths Group Ltd (ASX: WOW). Let alone grown them at that pace.

There's still a decent yield to consider

Coles' current trailing dividend yield of 3.66% is still pretty high by today's ASX standards. And when you factor in Coles' full franking, that yield rises to 5.24% grossed-up. And again, compared to Woolworths, Coles shines. Woolworths shares are only offering a dividend yield of 2.57% on current pricing.

Considering interest rates remain at near-zero levels, and look to continue that way for at least a year or two, a dividend yield that high is certainly useful. Compared to a term deposit that might yield 0.9% if you're lucky, Coles certainly brings home the bacon in this department.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET, Wesfarmers Limited, and Woolworths Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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