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Could the Coles (ASX:COL) share price be a buy?

The Coles Group Ltd (ASX: COL) share price might be one to think about as a defensive blue chip ASX share idea.

Why would Coles be a good defensive share?

We all need to eat. Supermarkets might be one of the most defensive ideas on the ASX. Coles is the second largest supermarket chain in Australia behind Woolworths Group Ltd (ASX: WOW).

In normal times, Coles can point to quite consistent earnings. But through COVID it has seen particularly strong growth.

Scale should help Coles remain in a strong position for a very long time. A few years ago it seemed a little worrying with Aldi and Costco growing quickly. but that doesn’t seem the case as much currently.

COVID-19 effects are wearing off

In the third quarter of FY21, Coles said total supermarket sales were down 6.1% year on year to $7.7 billion. The business is now cycling against the COVID-19 impacts that included high levels of pantry stocking.

However, Coles also included a reference to the performance two years ago. Sales went up 6.8% compared to two years ago.

There was growth in the one-year growth statistics for liquor and Coles Express sales. Liquor revenue rose 2.6% to $759 million and Express sales increased 7.4% to $275 million.

However, I wouldn’t be surprised to know in the last couple of months that Melbourne, Sydney and now Brisbane supermarket sales had increase because of the lockdowns.

Coles dividend

One of the attractive things about Coles is that as it steadily increases its profit over the long-term, Coles can also see its dividend grow too.

Coles is committed to paying a relatively high dividend payout ratio to shareholders. This boosts shareholder returns. It’s nice to receive cash every six months without having to do much.

According to projections on CommSec, Coles is expected to pay a fully franked dividend of 3.5% in FY22. That’s a decent yield in the current environment.

Is the Coles share price a good one to consider?

Coles is a solid business. It’s defensive, but I also can’t see a situation where it’s making big returns either. Hopefully it can continue with its work on ‘smarter selling’, increasing its private brand sales and being more sustainable.

However, there are other ASX dividend shares I’d rather think about for my portfolio.

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