I'd invest my first $500 in this high-dividend-yield ASX stock today

Here's a share that might just be perfect for beginners.

| More on:
Small girl giving a fist bump with a piggy bank in front of her.

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

Choosing your first ASX stock to invest in can be a big deal. Whilst hopefully it will represent the start of a long and prosperous journey of building wealth, we also have to consider that choosing a share that ends up faring poorly can have disastrous consequences for beginner investors' morale.

As such, I think an investor's first stock is an important choice and one with a big impact on how said investor can move forward with the share market.

So here's why I think a perfect candidate for a beginner investor's first $500 investment is Coles Group Ltd (ASX: COL).

Why I'd choose ASX 200 blue chip Coles for a first ASX stock

There are two reasons why I would go with Coles as a starter ASX stock.

The first is Coles' position in its industry. Here we have a strong, mature and dominant company that is the established duopolistic player in the Australian supermarket and grocery space.

To start with, supermarkets are a consumer staples industry that is highly resistant to recessions, inflation and other economic shocks. We all have to eat, after all.

As such, Coles' position in this industry makes it a very resilient business that will be making profits, regardless of the economic weather. No ASX share is 'safe'. But there's very little chance this company will ever go broke, in my opinion. I think these are important traits for an ASX investor's first share to have.

The second is Coles' dividend chops. Coles shares have only been on the ASX in their own right since 2018:

Created with Highcharts 11.4.3Coles Group PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.com.au

But in the years since its ASX debut, it has been steadily building up its fully-franked dividends. In 2019, investors received a total of 35.5 cents per share in dividend income.

This rose to 57.5 cents per share in 2020, 61 cents per share in 2021 and 63 cents per share in 2022. Coles' first dividend of 2023 is set to be an increase over 2022's corresponding payment as well. Today, Coels has a dividend yield of around 3.7%, which grosses up to a high-yielding 5.29% with the value of those franking credits. 

So all in all, I think these two reasons make Coles an ideal candidate for a first ASX share to buy with $500. It's a strong and stable company with a high dividend yield. What better way to begin an ASX share portfolio?

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Coles Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on How to invest

A worried woman sits at her computer with her hands clutched at the bottom of her face.
How to invest

What should I do if my ASX stock falls by more than 10% this earnings season?

Selling isn't always the best solution to a big drop.

Read more »

A happy elderly man wearing a red cape smiles as he jumps up like a hero from a massage table.
How to invest

How to keep investing simple (and fun!) with this timeless strategy

There’s a smarter, simpler way to invest that’s caught the attention of beginners and pros alike.

Read more »

Man puts arm around woman and kisses her cheek outside their new home
How to invest

How to build a $100,000 ASX share portfolio from scratch

You may be surprised how quickly you could reach this goal.

Read more »

asx share price fall represented by investor with head in hands
How to invest

Should you sell you ASX shares if you think a stock market crash is coming?

Can we ever predict a market crash?

Read more »

A happy young couple lie on a wooden deck using a skateboard for a pillow.
How to invest

How to build wealth with ASX shares without taking big risks

Many investors believe they need to chase high-risk, speculative ASX shares to grow their wealth quickly. But in reality, most…

Read more »

Happy man holding Australian dollar notes, representing dividends.
How to invest

How $500 a month in ASX shares could become $1 million

It might not be as hard as you think to become a millionaire through the share market.

Read more »

Man pointing an upward line on a bar graph symbolising a rising share price.
How to invest

How to invest when the ASX hits a record high

Worried about buying at today's prices? Here's why you shouldn't be concerned.

Read more »

A man wearing glasses sits back in his desk chair with his hands behind his head staring smiling at his computer screens as the ASX share prices keep rising
How to invest

Lessons from a self-made ASX millionaire

Here's how he did it.

Read more »