Unveiling the Dividend Prospects of Coles Group Ltd
Coles Group Ltd (CLEGF, Financial) recently announced a dividend of $0.36 per share, payable on 2024-03-27, with the ex-dividend date set for 2024-03-05. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Coles Group Ltd's dividend performance and assess its sustainability.
What Does Coles Group Ltd Do?
Coles Group Limited is one of Australia's largest retailers, operating the second-largest supermarket chain behind market leader Woolworths, and is the country's third-largest liquor retailer. The group has an extensive store network of about 2,500 store outlets and roughly 80% of Australian live within a 10-minute drive from their nearest Coles store. The retailer employs some 110,000 people, who process over 20 million individual customer transactions a week. This compares with Woolworths processing almost 30 million customer transactions per week from Australia's population of 25 million.
A Glimpse at Coles Group Ltd's Dividend History
Coles Group Ltd has maintained a consistent dividend payment record since 2019. Dividends are currently distributed on a bi-annually basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Coles Group Ltd's Dividend Yield and Growth
As of today, Coles Group Ltd currently has a 12-month trailing dividend yield of 5.05% and a 12-month forward dividend yield of 5.00%. This suggests an expectation of decreased dividend payments over the next 12 months. Coles Group Ltd's dividend yield of 5.05% is near a 10-year high and outperforms 74.24% of global competitors in the Retail - Defensive industry, suggesting that the company's dividend yield stands out as an attractive proposition for income investors.
Over the past three years, Coles Group Ltd's annual dividend growth rate was 6.90%. Based on Coles Group Ltd's dividend yield and five-year growth rate, the 5-year yield on cost of Coles Group Ltd stock as of today is approximately 5.05%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-12-31, Coles Group Ltd's dividend payout ratio is 0.87, which may suggest that the company's dividend may not be sustainable.
Coles Group Ltd's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Coles Group Ltd's profitability 4 out of 10 as of 2023-12-31, suggesting the dividend may not be sustainable. The company has reported net profit in 5 years out of the past 10 years.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Coles Group Ltd's growth rank of 4 out of 10 suggests that the company has poor growth prospects and thus, the dividend may not be sustainable. Coles Group Ltd's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Coles Group Ltd's revenue has increased by approximately 2.20% per year on average, a rate that underperforms approximately 64.11% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Coles Group Ltd's earnings increased by approximately 2.90% per year on average, a rate that underperforms approximately 69.71% of global competitors.
Next Steps
In conclusion, while Coles Group Ltd presents an attractive dividend yield, the sustainability of its dividends is a matter of concern given the payout ratio, profitability rank, and underwhelming growth metrics. Investors should consider these factors in their investment decision-making process, weighing the potential for income against the risks associated with dividend sustainability. For those seeking to explore further opportunities in high-dividend yield stocks, GuruFocus Premium users can utilize the High Dividend Yield Screener to discover stocks that align with their investment criteria.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
