The Woolworths Limited (ASX: WOW) share price has fallen 30% in three years. Yikes!
But if we zoom out a little bit, it is easy to see a different picture.
Since its initial public offering (IPO) in '93, Woolies shares have returned 890% plus dividends.
Woolworths, WOW!
Looking ahead, many investors will be left wondering if the company can return to its former glory. Here are 3 reasons to own Woolworths shares.
- Dividends. This one is obvious. If you buy Woolies today you stand to receive a 3.7% fully franked dividend. This is an attractive yield given current term deposit interest rates.
P.S. if you bought and hold shares from the IPO, this year's dividend is equivalent to a yield of 35% — fully franked! - A leaner business. With Masters stores gathering dust, Woolworths can focus on what it is best at: Supermarkets. While a rampaging Coles and Aldi make rebuilding the brand a little challenging, a leaner business model could prove to be profitable over the coming five years.
- Defensive. As a supermarket and liquor business (it also owns Big W) Woolies sells non-discretionary products, the things we need to survive. As a result it is likely to weather a downturn in the economy better than most companies.
Foolish Takeaway
At today's prices, Woolworths shares appear reasonably priced. And while some investors may believe the recent woes are a sign of things to come, I think it is important to not underestimate the company. With a sophisticated supply network and store footprint, it has a strong footing in the local market.
Ultimately, I think Woolies shares are closest to a hold if anything. Management will be forced to make some tough decisions in the future and put simply I think there are better opportunities on the ASX.