Owners of Coles Group Ltd (ASX: COL) shares may feel wealthier today because today's the day that the company's dividend cash hits bank accounts.
The supermarket business has been paying a dividend to investors every six months for a few years now. This latest dividend being paid is the FY23 final dividend.
Dividends are a very effective way for companies to share their profit with shareholders. Australian companies can also attach franking credits to their dividends, boosting the after-tax dividend yield.
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How much will owners of Coles shares get?
The dividend hitting bank accounts today is 30 cents per share, which was the same as last year.
At the current Coles share price, that represents a fully franked dividend yield of 1.9% — or 2.7% grossed-up.
Some investors may have opted to take part in the dividend re-investment plan (DRP) where shareholders receive new shares rather than cash.
These new DRP shares will be issued at a price of $15.85, with no DRP discount for taking part.
How big could the next dividends be?
In FY23, Coles paid an annual dividend per share of 66 cents, which was higher than the 63 cents per share paid in FY22.
The projection on Commsec suggests the annual dividend per share might be cut to 61 cents per share amid a forecast reduction in profit. If that were the case, it would be a fully franked dividend yield of 3.9% and a grossed-up dividend yield of 5.6%.
Profit and dividends could then rebound in FY25, according to the estimates on Commsec. In FY25, it could generate earnings per share (EPS) of 81.2 cents and pay an annual dividend per share of 67.5 cents.
Those FY25 numbers, if achieved, would mean the current Coles share price is valued at 19 times FY25's estimated earnings with a grossed-up dividend yield of 6.2%.
What next for Coles shares?
The business is planning to hold its annual general meeting (AGM) on 3 November 2023. This is where shareholders get to vote, hear the thoughts of the company's leadership, and probably get an update on Coles' latest trading.
