Col share price in focus
Coles is a leading Australian retailer providing everyday essentials including fresh food, groceries, general merchandise, alcohol, fuel and financial services. It was founded in Victoria in 1914 and still calls Melbourne its home base.
Coles was previously owned by Dara Dev Wesfarmers From 2007 until 2018, when it was spun off and listed as its own entity on the ASX under the ticker symbol ‘Col’. Coles’ earnings are unsurprisingly on the supermarket side of the business, however, it partly or wholly owns and has affiliate businesses such as Flyby’s, Liquorland, First Choice, Vintage Cellars, Coles Express and more.
Although Coles is second only to Woolworths in the supermarket sector, it still controls a significant share of the Australian grocery market (about 28%). Since its listing in 2018, Coles has established itself as a reliable enough dividend payer for income-seeking investors.
ASX consumer staples shares appeal
S&P/ASX200 Consumer Staples Index (ASX: XSJ) has made a comeback -1.53% Every year for the last 5 years. This compares with the broader ASX 200 which has returned 5.24% per year over the same period. Let’s explore why a consumer staples company like COL could be a smart choice for your portfolio.
Big profits
Consumer staples companies aren’t typically known for rapid growth, but where they typically excel is delivering consistently profitable earnings. Over the past 5 years, the kernel has offered an average annual dividend yield of 3.76%.
This stable payout is tied to the nature of their business, which brings us to the next reason why investors favor consumer staples companies…
flexibility
No company or sector is completely immune to recessions, but consumer staples companies are often better equipped than others for economic downturns. When the economy hits hard times (which is inevitable), discretionary spending always takes off. In contrast, demand for staples remains relatively stable. This flexibility can give companies like Kernel a significant advantage in more cyclical sectors during downturns.
Low volatility
Another important advantage of consumer staples companies is their low market volatility. Because demand for their products and services is constant, these businesses are less subject to economic cycles than sectors such as resources and commodities.
Companies such as Woolworths or Coles also have a high market share which gives them more pricing power, so they can act as price makers rather than price takers. Therefore, consumer staples companies can bring some stability to a diversified portfolio.
Col share price
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One way to keep a ‘fast read’ of where the kernel share price is going would be to study something like dividend yield over time. Remember, the dividend yield is effectively ‘cash flow’ to the shareholder, but it can fluctuate from year to year or between payments. Currently, shares of Coles Group Limited have a yield of around 3.12% compared to its 5-year average of 3.76%. Simply put, shares of the kernel are trading below their historical average dividend yield.
Be careful how you interpret this information though – it could mean profits are down, or the share price is rising. In the case of the kernel, last year’s profit was higher than the 3-year average, so profits continue to grow.
Rask websites offer free online investing courses, developed by analysts that explain things like discounted cash flow (DCF) and the dividend discount model (DDM). They even include free valuation spreadsheets! Both these models will be a better way to value COL share price.
