When Coles Group Ltd (ASX: COL) first hit the ASX boards as its own company back in late 2018, it wasted little time establishing its dividend credentials. The famous Australian grocer had been a wholly-owned subsidiary of Wesfarmers Ltd (ASX: WES) for around a decade before it was pushed out of the Wesfarmers nest at roughly $12.50 a share. Wesfarmers shareholders were entitled to receive one new Coles share for every Wesfarmers share already owned.
Today, we can say with the benefit of hindsight that the spinoff has been of great reward to both parties. Coles shares closed at $17.67 this afternoon, a good 37.6% above the price they first commanded on the ASX back in 2018. And Wesfarmers shares have gone on to add close to 50% to their value since the spinoff too.
But now Coles has had a few years under its belt as a standalone company, let's take a look at how its dividend chops have developed.
So Coles' first full year of paying dividends came in 2020. That was after some messy financial untangling from Wesfarmers, which included a special dividend, was undertaken over 2019. In 2020, the grocer paid out two fully franked dividends – an interim payment of 30 cents per share, and a final dividend of 27.5 cents per share. 2021 saw Coles build on that record. It doled out an increased interim dividend of 33 cents per share, as well as the final dividend of 28 cents. Again, both payments were fully franked.
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Can Coles keep the dividend train coming?
Kicking off 2022, the company kept its interim dividend steady at a fully franked 33 cents per share. And that brings us to the present.
But what does the future hold for Coles? Can it keep its dividends rising every year?
Well, of course, we can't know for sure. But one ASX expert investor thinks Coles can rise to the challenge.
As my Fool colleague James covered on Sunday, broker Citi is expecting big things from Coles' dividend department. The broker reckons Coles will fork out a total of 65 cents per share in dividends over FY2022. Since we've already covered Coles' interim 33 cents per share dividend for FY22, that would imply a final dividend of 32 cents per share. That, if enacted, would be a hefty increase on Coles' final dividend from FY21.
But it gets better for Coles investors. Citi is also pencilling in dividends worth 72 cents per share for FY2023. So that would be another sizeable jump. That might explain why this broker has a 12-month share price target of $19.30 in place for Coles shares right now. That would imply an upside of just over 9% on current pricing.
At the current Coles share price, the ASX 200 blue chip share has a market capitalisation of $23.5 billion, with a dividend yield of 3.45%.
