Coles Group Ltd (ASX: COL) shares were out of form in 2022 and dropped 6.8% over the 12 months.
While this is disappointing, one positive is that it has driven the dividend yield on offer with the supermarket giant's shares higher.
In addition, it could also mean some solid gains from its shares in the next 12 months if brokers are on the money with their predictions.
But let's start with Coles' dividends. What could income investors expect from the supermarket operator's shares in the near future?
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The Coles dividend
Coles understands the importance of paying dividends to its shareholders. So much so, it has a dividend policy in place that aims to pay out upwards of 90% of its underlying earnings each year.
Combined with its earnings growth, this has allowed the company to increase its dividend each year (even during COVID) since demerging from Wesfarmers Ltd (ASX: WES) in 2019.
The good news is that the team at Citi expect this trend to continue in FY 2023.
The broker is forecasting a 72 cents per share fully franked dividend, up 14% from 63 cents per share in FY 2022. Based on the current Coles share price of $17.18, this will mean a yield of 4.2% for investors.
The even better news is that Citi is forecasting another increase to the Coles dividend in FY 2024. Its analysts are expecting a 7% increase to 77 cents per share for that financial year, which equates to a fully franked 4.5% dividend yield.
Are Coles shares good value?
As I mentioned at the top, a number of brokers believe Coles shares can rise higher from here.
Citi is among this bullish group of brokers and has a buy rating and $18.90 price target on them.
This implies potential upside of 10% for investors, which stretches the total potential return to beyond 14%.
