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Are Coles shares the best bet for beginners?

Sebastian Bowen
Coles share price

Could Coles Group Ltd (ASX: COL) shares be the best ASX option for beginners?

Well, that’s a great question. What makes an ASX share good for beginners in the first place? Choosing shares for your own personal portfolio is arguably the hardest part of investing – especially for beginners. There are literally hundreds of ASX companies to choose from, so picking just one might feel like trying to find the proverbial needle in the haystack.

I think there are 3 things that make Coles such a choice.

1. Coles is easy to understand

Coles doesn’t have an overly complicated business model – it sells food, drinks and household essentials. I think almost everyone in Australia would have at least been inside a Coles supermarket at some point in their lives and would know what consumers look for in a grocer and what the competition looks like as well.

Owning shares means you assume the role of business owner – you literally own a small piece of Coles the company and own a proportionate entitlement to the profits that the company makes.

As any business owner will tell you, understanding how and why your company makes its money is a fundamental requirement for future success, and compared with other choices, I think Coles is a good business for a beginner investor to wrap their head around.

2. Coles is defensive

Whilst no ASX share provides absolute safety and certainly of capital, I think Coles is one of those companies that offers as much as is available. Coles sells items that we all need to live and function in a modern society.

If there is some kind of recession or economic shock, Coles is unlikely to feel too much pain – unlike most other companies that list on the share market. That in turn means there is very little chance of Coles going broke, or of Coles’ shares permanently losing capital due to economic conditions – characteristics that would be very beneficial for a beginner investor, in my view.

3. Coles pays a dividend

Most ASX shares offer some kind of dividend (cash payment to shareholders) and Coles is no different.

On current prices, I think Coles shares are providing a forward fully franked dividend yield of 3.6%. That’s a lot better than what you could expect from your bank these days. I always say that a great way to get beginners hooked on investing is by illustrating the joys of receiving dividend payments, which is passive income in its best form.

Foolish takeaway

For these 3 reasons, I think Coles is a great option for beginner investors today. Coles is a famous Aussie name that is instantly recognisable to all Australians. Thus, I think owning a piece of it is a great way to get your foot in the share market door!

The post Are Coles shares the best bet for beginners? appeared first on Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2020