The Australian Securities Exchange (ASX) listed Coles Group Ltd (ASX: COL) has seen its stock price decline by approximately 15% since reaching its peak in September 2025. This downturn presents a potential opportunity for long-term investors, particularly those interested in dividend stocks.
Coles recently reported robust growth figures in its FY26 first-half results. The company’s total group sales revenue rose by 2.5% to $23.6 billion, while supermarket sales revenue increased by 3.6% to $21.4 billion. Total operating profit (EBIT) saw a significant rise of 10.2% to $1.23 billion, and the underlying net profit climbed 12.5% to $676 million. However, the statutory net profit experienced an 11.3% decline to $511 million, attributed to the underpayment of wages to staff.
ASX Dividend Stock Credentials
Coles has maintained a strong dividend record over the years, making it an attractive option for investors seeking passive income. The company increased its interim dividend per share by 10.8% to 41 cents per share. This increase is notable as few large S&P/ASX 200 Index (ASX: XJO) shares have managed to raise their payouts by more than 10%.
According to broker UBS, Coles could pay an annual dividend per share of 77 cents, translating into a grossed-up dividend yield of 5.3% when including franking credits. UBS forecasts suggest that the annual payout per share could continue to rise each year from FY27 to FY30, potentially reaching 87 cents per share in FY27 and 91 cents per share in FY28. This projection indicates a steady and attractive dividend progression.
Is the Coles Share Price Appealing?
UBS has rated Coles as a “buy” with a price target of $24. The broker’s confidence stems from Coles’ strong execution in the supermarket sector, characterized by effective promotions and cost leadership. Despite challenges in its Liquor business, Coles maintains a wider-than-average forward price-to-earnings (P/E) multiple gap with its competitor Woolworths (WOW), following a share price performance of -8.6% since the FY25 results, compared to the ASX200’s +2.9%.
UBS remains optimistic about Coles’ future, citing its promotional effectiveness and recent investments, such as the Witron Automated Distribution Center (ADC) and Ocado Customer Fulfillment Centers (CFCs), which bolster cost leadership and sales growth projections for CY26.
Long-Term Investment Potential
For investors considering Coles as a long-term investment, the current lower price may be an opportune moment to buy. The expectation of increasing net profit and dividend per share in the coming years supports this view. As long as Coles continues to grow its sales and bottom line, it stands as a strong ASX dividend stock with defensive and growing earnings.
In conclusion, while the recent decline in Coles’ share price may concern some investors, it also offers a strategic entry point for those focused on long-term gains and dividend income. The company’s solid financial performance and growth prospects make it a compelling choice for investors seeking stability and income in the ASX market.
