Owning Coles Group Ltd (ASX: COL) shares has been a rewarding pick for investors seeking rising dividend payouts.

It’s understandable why the business has managed to deliver such a consistently growing dividend – a supermarket business selling food is a vital service and Australia’s population has steadily increased over the years.

FY26 was a prime example of how the business can deliver rising profit and larger dividends.

FY26 total revenue grew 2.8% to $45.6 billion, total underlying operating profit (EBITDA) rose 7.1% to $4.2 billion, underlying EBIT (another form of operating profit) rose 9.9% to $2.3 billion and underlying net profit after tax (NPAT) grew 13.7% to $1.25 billion.

This result allowed the Coles board of directors to hike the annual dividend per Coles share by 13% to 78 cents. Let’s take a look at what’s expected of the company’s dividend for the next few years.

FY27

We are currently in the 2027 financial year for Coles, with the supermarket business saying that its sales growth in the first eight weeks of FY27 was consistent with the fourth quarter of FY26. Its e-commerce penetration continues to be impressive and a significant driver of growth – this reached 15.7% over the period.

In the other divisions, liquor’s sales trajectory strengthened across the first eight weeks compared to the fourth quarter of FY26. Its convenience portfolio continued to deliver positive growth, while performance in the warehouse portfolio also improved.

Coles’ CEO Leah Weckert noted that the company has made significant progress over the last three years and it has a “strong plan for the year ahead to keep improving the customer offer, strengthen the business and support sustainable long term growth.”

According to the projection on Commsec, the business is projected to hike its annual dividend per Coles share by 7% to 83.5 cents. That’s a potential forward grossed-up dividend yield of 5.1%, including franking credits, at the time of writing.

FY28

The business is forecast to increase its annual dividend per share again in the 2027 financial year, which I’m sure is positive news for shareholders.

The projection on Commsec implies a possible year-over-year 6.3% increase of the annual dividend per share to 88.8 cents.

If owners of Coles shares do receive that dividend, it would be a grossed-up dividend yield of 5.4%, including franking credits, at the time of writing.

FY29

The best dividend of all could happen in the last year of this series of projections.

According to the projection on Commsec, the business could hike its FY29 dividend per share by 9.7% to 97.4 cents per share.

If that prediction comes true, then Coles would have a grossed-up dividend yield of 5.9%, including franking credits, at the time of writing.

There are not many ASX blue-chip shares that I think are as likely as Coles to continue hiking the dividend in the coming years, so it’s definitely one to look at for passive income investors.

The post Here’s the dividend forecast out to 2029 for Coles shares appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison 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.

Drone company Innovaero Technologies Limited (ASX: INN) will list on the ASX next week after an initial public offer (IPO) which raised $40 million.

Australian defence force a key customer

The company’s prospectus said the company is focused on both crewed and uncrewed aircraft development and support systems.

Chair Vincenzo Di Pietro said in the prospectus:

As at the date of this Prospectus, the Company’s primary product is the OWL-B, a one-way loitering (OWL) munition system that forms part of the Company’s OWL family of systems, which is being developed in collaboration with the Commonwealth (Department of Defence) (DoD) via the Mission Talon-Strike Contract (refer to Section 7.1 for further details). In addition to the Company’s current and historic arrangements with the DoD for uncrewed aerial systems, the Company also derives revenue from its engineering, certification, composite manufacturing and MRO business.

Mr Di Pietro said a priority for the company would be advancing the development of the OWL family of systems, and in particular, “advancing the OWL-B system through remaining qualification and certification with the DoD with the objective of securing production contracts”.

The company would also be looking to expand into international markets in the UK, Japan, and the US, he said.

The company’s prospectus said it was looking to differentiate itself as an Australia-owned drone manufacturer.

The company said:

In Australia, the relevant market opportunity is significant compared with the United States and parts of Europe, particularly in relation to sovereign designed and manufactured armed drones and related interceptor capability. Historically, much of the defence market has been dominated by large primes and platform-centric acquisition models. However, the structural shift toward autonomous, attritable and scalable systems is increasing the role of specialist defence technology companies, such as the Company. The Company seeks to differentiate itself through sovereign capability, agility, and its unique (for its size) vertically integrated aerospace design/certification/manufacture capability.

Significant cash burn

The company’s financials, included in the prospectus, showed it generated revenue of $9.9 million in FY26 and made a net loss of $5.3 million.

The Innovaero Group was founded in 2006, before being formally incorporated in 2020.

The prospectus said:

Since then, its business and activities have evolved and expanded to include the delivery of integrated capabilities spanning complex aerial camera systems, mission-critical defence systems and high-value composite aerostructures for defence, aerospace, and adjacent industrial markets.

Following the capital raising, the executive director, Mike Von Bertouch, is expected to own 27.63% of the company.

The post Check out the ASX’s newest drone company appeared first on The Motley Fool Australia.

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Motley Fool contributor Cameron England 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.

Building a portfolio of ASX shares that can generate income alongside your usual earnings is a great way to enhance your financial security and diversify your income streams.

How to get started

Generating substantial earnings from dividends does however demand substantial amounts of savings, and getting there can seem an insurmountable task.

Therefore, it’s good to start relatively small, and use the power of compound interest to your advantage.

Today, I’m looking at what can be built up from a base of $20,000.

To generate the target of $5,000 per year in dividend income, you’d be looking at amassing about $100,000 in capital.

I’d argue you could generate about 7% per year from a combination of capital increases – share price growth – and dividends.

If you start with $20,000 in savings, I’d aim to save a further $100 per week.

Over a nine-year period, and assuming a return of 7% per year, you would have $99,055 at the end of this time.

If you’d like to tweak the calculations yourself, head over to the Federal Government’s Moneysmart calculator and have a play around.

Once you hit the $100,000 mark, if you choose, you could start taking your dividends out as an income stream rather than reinvesting them.

So at this stage, what sort of stocks would you be looking to own?

Building an income-generating portfolio

Firstly, it’s a good idea to keep in mind whether the stocks are paying franked dividends.

A fully-franked share comes with a 30% tax credit for the tax already paid by the company, meaning you do not have to pay your full tax rate on the dividends earned.

In terms of trying to hit our target of $5,000 a year, you’d need to be aiming for a dividend yield of 5% – but keep in mind this doesn’t take into account any tax you’d need to pay.

Tolls roads operator Atlas Arteria Ltd (ASX: ALX) is a reasonable company to consider, as it is currently paying a 9% yield, with brokers expecting a relatively strong yield to be maintained for the next few years.

Gas pipelines operator APA Group Ltd (ASX: APA) is also a good fit, paying a 5.39% dividend, albeit only 31% franked.

Investment company Wam Active Ltd (ASX: WAA) is paying 7.4%, while Argo Investments Ltd (ASX: ARG) is paying 4.18%.

Among the banks, Westpac Banking Corp (ASX: WBC) is paying 4.47% while Bank of Queensland Ltd (ASX: BOQ) is paying 6.1%.

Retailer Universal Store Holdings Ltd (ASX: UNI) also has a healthy dividend yield at 6.22%.

So as you can see, there are plenty of stocks around which can deliver decent yields once your savings have hit the target.

The post Starting with $20,000, how to build a portfolio generating $5,000 a year in passive income appeared first on The Motley Fool Australia.

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Motley Fool contributor Cameron England 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 Apa Group. The Motley Fool Australia has recommended Universal Store. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.