21% in a year: Have Coles shares become too expensive?

Brokers give their verdict on Coles for 2025.

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By all accounts, it has been a great year to own Coles Group Ltd (ASX: COL) shares in 2024. Coles has had one of its best years in a long time this year. The ASX 200 supermarket giant started January at $16.11 a share. But today, those same shares are going for $19.03 each.

This means that Coles investors have seen their shares grow by 18.2% over 2024 to date. 

Coles has also grown by an even more impressive 21% over the past 12 months, given that the company was trading at just $15.74 a share this time last year.

Check that all out for yourself below:

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

But that's not where the good times end. Coles investors have also enjoyed some meaningful dividend income over the past 12 months. The company has paid out an annual total of 68 cents per share in fully-franked dividends this year, a healthy rise over the 66 cents investors enjoyed in 2023.

This would have resulted in someone who bought Coles shares a year ago enjoying a dividend yield of 4.32% over 2024.

So that's all well and good for Coles shareholders. But does this company remain a buy today for new and existing investors?

Are Coles shares still a buy at $19 each?

Well, at least two ASX brokers think that they are.

Last month, my Fool colleague discussed the views of broker Ord Minnet. Ord Minnet liked Coles' third-quarter update from October so much that it subsequently raised its rating on the stock from 'hold' to 'accumulate':

Coles provided a solid update for the September quarter. The company demonstrated strong execution with healthy first-quarter FY25 sales and clear cost discipline. Secondly, tightly managed capital expenditure (capex) should reward shareholders with healthy free cash flow (FCF) and dividends.

Beyond FY25, Coles has several earnings drivers in FY26, underpinning our confidence in earnings growth. The risk-reward is attractive, with Coles now trading at a 16% discount to arch-rival Woolworths (WOW).

It issued a 12-month share price target of $19.50 for Coles shares, which, if realised, would see another few percentage point gains from its current price.

Ord Minnet isn't the only broker eyeing off Coles shares though. We've also recently covered the views of its fellow ASX broker Bell Potter.

Bell Potter stated, "We continue to see COL as providing an attractive earnings growth profile through to FY27e on an underlying basis". 

This broker anticipates a rising dividend over the coming years, peaking at 86 cents per share in FY2027. Bell Potter has given Coles a 12-month share price target of $20.50.

So, ASX brokers seem fairly optimistic about Coles shares today. But let's see what happens in 2025 and beyond.

At the current Coles share price, this ASX 200 stock is trading on a price-to-earnings (P/E) ratio of 22.03, with a dividend yield of 3.6%. 

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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.

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