Are Coles shares an inflation-beating investment right now?

Man in an office celebrates at he crosses a finish line before his colleagues.Man in an office celebrates at he crosses a finish line before his colleagues.

Are Coles Group Ltd (ASX: COL) shares an inflation-beating investment right now?

2022 has certainly brought some new concerns to investors’ doors that they were not really thinking about until this year. Chief among those is the concern over inflation. 2022 thus far has seen inflation spike in many advanced economies of the world to levels not seen in decades.

Just last week, we found out that inflation in the Australian economy has hit an annualised rate of 6.1%. That’s the highest rate many investors have ever seen.

So in these uncertain times, is the Coles share price really ASX investors’ best bet to counter inflation?

Are Coles shares inflation-proof?

After all, Coles is a major consumer staples company on the ASX. Together with arch-rival Woolworths Group Ltd (ASX: WOW), Coles is one of the major supermarket chains providing food, drinks and other household essentials to Australian customers.

Since we all ‘need’ these products, this arguably makes Coles and Woolworths inherently resistant to the corrosive effects of inflation.

Well, that’s certainly the view of analysts at ASX broker Citi. According to reporting in The Australian today, Citi has just reaffirmed its buy rating on Coles shares. That came with a 12-month share price target of $21.

Part of the reason for Citi’s optimism over the ASX grocer is indeed the company’s perceived ability to weather inflationary pressures:

Mid to high single-digit inflation, expected to persist for at least the next 6 to 12 months, will drive sales growth for supermarket majors Coles and Woolworths.

But Citi isn’t the only ASX broker that likes the look of Coles in our new inflationary world. As reported on Livewire today, broker Morgans has also named Coles shares as one of “several all-weather companies we think are capable of resisting cost inflation”.

As my Fool colleague covered last week, Morgans has a 12-month share price target of $20.65 on Coles shares right now. This broker is also predicting that Coles will be able to raise its dividend to 61 cents per share for FY2022. And then to 64 cents for FY2023.

So two ASX brokers agree that Coles is well positioned to weather the inflationary pressures currently facing the Australian economy. No doubt shareholders will welcome that news.

At the current Coles share price, this ASX 200 grocer has a market capitalisation of $25.19 billion. That’s with a dividend yield of 3.24% as well.

The post Are Coles shares an inflation-beating investment right now? appeared first on The Motley Fool Australia.

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Citigroup is an advertising partner of The Ascent, a Motley Fool company. 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 COLESGROUP DEF SET. 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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