Will Coles shares be worth owning in FY24?

This ASX broker reckons Coles shares are a buy today.

| More on:
a woman ponders products on a supermarket shelf while holding a tin in one hand and holding her chin with the other.

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

Key points

  • We're still a few days from the end of FY2023, but Coles shares haven't had a spectacular 12 months
  • Coles did eke out a gain over FY2023, but it vastly underperformed the broader ASX 200 Index
  • However, one ASX broker thinks FY2024 will be a different story for the supermarket giant

It's fair to say that Coles Group Ltd (ASX: COL) shares weren't really worth owning over FY2023. Although we're still a few days from the end of the current financial year, Coles investors have enjoyed a return of around 2.8% from their Coles shares over FY2023 to date.

Compare that with the broader S&P/ASX 200 Index (ASX: XJO)'s return of roughly 7.7%, and we have a serious market laggard here, as you can see below:

To be fair, Coles shares have had a far better 2023 calendar year so far, being up more than 11% since the start of the year. But now we're just splitting hairs.

So let's now turn our focus forward rather than backward, and discuss whether this ASX 200 consumer staples share might be worth owning for the 2024 financial year.

Are Coles shares an FY2024 buy today?

Well, at least one ASX broker thinks they are. As we covered earlier this month, the Coles share price was named as a buy by ASX broker Citi. The broker has given Coles a 12-month price target of $20.20. If realised, that would see investors enjoy a 10.5% gain from the $18.28 the Coles share price closed at yesterday.

The next 12 months obviously cover the vast majority of FY2024. But Citi reckons Coles will flourish beyond the next financial year as well. It is anticipating the supermarket operator to provide "solid earnings and dividend growth through to at least FY 2025".

In terms of dividends, Citi reckons Coles shares will yield 73 cents per share in fully-franked dividends for FY2024, up from 69 cents per share for FY2023. By FY2025, the broker reckons Coles will be forking out 80 cents per share. If this indeed comes to pass, it would push Coles' forward dividend yield on current pricing well over 4%.

Citi has also expressed its excitement over Coles' new automated distribution centre in Redbank, Queensland. It stated that this centre, and other automation advances, should benefit Coles' earnings starting in FY2025 and continuing from there.

So there is a lot to be excited about the Coles share price at its current level, at least according to this one ASX broker. Let's wait and see if Citi is on the money here.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. 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 Consumer Staples & Discretionary Shares

A young man punches the air in delight as he reacts to great news on his mobile phone.
Consumer Staples & Discretionary Shares

A2 Milk shares rocket 18% on guidance upgrade and big dividend news

The infant formula company is finally going to start paying dividends to shareholders.

Read more »

A man in a suit face palms at the downturn happening with shares today.
Consumer Staples & Discretionary Shares

Why is this ASX 300 stock crashing 15% today?

Let's see how this popular stock is performing so far in FY 2025.

Read more »

Happy couple laughing while shopping in supermarket
Consumer Staples & Discretionary Shares

Coles shares: Broker says the 'risk-reward is attractive'

Ord Minnett has good things to say about the supermarket giant following its quarterly update.

Read more »

A man looks a little perplexed as he holds his hand to his head as if thinking about something as he stands in the aisle of a supermarket.
Consumer Staples & Discretionary Shares

Down 20% this year, can Woolworths shares catch a break?

The headlines continue this week.

Read more »

A man looks sadly away from his computer screen as he holds a slice of pizza in his hand with an open pizza box in front of him on his desk.
Consumer Staples & Discretionary Shares

3 reasons this expert is selling Domino's shares now

Down 48% in 2024, why this investing expert recommends selling Domino’s shares.

Read more »

a car driver sits up and looks alert with wide eyes and an expression of concentration while he holds the wheel of a car.
Share Fallers

Why this ASX All Ordinaries stock just crashed 24%!

Investors are punishing the ASX All Ords company today. Let’s find out why.

Read more »

woman holding man's hand as he falls representing ups and downs of ASX investing
Consumer Staples & Discretionary Shares

Why did this ASX 200 stock just crash 11%?

Investors appear nervous about a $475 million acquisition.

Read more »

Man pointing at a blue rising share price graph.
Earnings Results

Guess which ASX All Ords share is soaring on 21% FY 2024 growth

Investors are piling into the ASX All Ords share today. Let’s find out why.

Read more »