Should I invest $5,000 in Coles shares now?

If you’re looking at putting $5,000 into the share market, I think Coles Group Ltd (ASX: COL) shares are worth serious consideration right now.

This is because I see the supermarket leader as a steady, reliable business trading at an attractive price.

A simpler entry point than before

Coles shares are trading at $21.05 at the time of writing, which is about 13.5% below their 52-week high of $24.28.

That might not sound like a huge discount. But for a defensive, supermarket giant that rarely gets cheap, I think it matters.

If Coles shares were simply to recover to that previous high, a $5,000 investment today would grow to roughly $5,770. That’s before factoring in dividends.

Of course, there’s no guarantee that happens. But it shows how even a recovery in a fallen share price can generate meaningful returns for investors.

A reliable income stream

One of the main reasons I’d consider Coles is the income it offers. The company has declared dividends totalling 73 cents per share over the past 12 months, which is fully franked.

At the current share price, that equates to a dividend yield of around 3.5%. For a $5,000 investment, that’s about $175 per year in dividend income, assuming payouts remain steady.

And because those dividends are fully franked, Australian investors may benefit from franking credits on top.

It’s not the highest yield on the ASX. But in my experience, chasing the highest yield can often come with higher risk.

Coles, on the other hand, offers what I’d describe as dependable income.

A business that keeps showing up

What I like most about Coles is how consistent the business is. Even in a challenging environment, it continues to grow sales and earnings.

Its recent half-year results showed group sales revenue increasing to $23.6 billion, group EBIT rising over 10%, and Supermarkets EBIT growing 14.6%.

That growth was supported by steady customer demand, operational improvements, and a continued focus on value. And that last point matters.

Management highlighted that customers remain value-focused, and Coles is responding with promotions, expanded product ranges, and loyalty offers

To me, that reinforces the idea that supermarkets are resilient businesses. People still need groceries, regardless of what the economy is doing.

Is it a buy?

I’d be comfortable investing $5,000 in Coles shares today.

This is because I think it offers a combination of a more attractive entry point, reliable, fully-franked income, a defensive business model, and ongoing operational improvements.

Overall, it’s the kind of stock I’d be comfortable owning through different market conditions.

Foolish Takeaway

Coles shares aren’t likely to double overnight. That’s not the point.

At around 13.5% below their recent high, offering steady dividends and backed by a resilient business, I think they’re a solid option for a $5,000 investment today.

For me, it’s a reminder that sometimes the best opportunities aren’t the most exciting ones.

The post Should I invest $5,000 in Coles shares now? appeared first on The Motley Fool Australia.

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Motley Fool contributor Grace Alvino 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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.