It's been a very ordinary couple of years for shareholders in Australia's largest retailer Woolworths Limited (ASX: WOW).
In 2014, the stock price declined by 9% compared with a gain of around 1.5% in the benchmark S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).
The underperformance over the past two calendar years is even worse; the share price has gained less than 4% compared with a 17% gain in the index.
Meanwhile, over a three-year period the underperformance isn't quite as bad with the index rallying 30%, but Woolworths managing to climb 22%.
While shareholders will certainly be disappointed with the recent performance of this leading blue-chip there are reasons of hope for the future…
- Turnaround. One of the biggest drags on Woolworths' earnings has been the retailer's decision to take on the Wesfarmers Ltd (ASX: WES) owned Bunnings chain of hardware stores. So far, this has led to Woolworths bleeding significant amounts of cash. But if he board's decision to enter this segment turns out to be 'on the money' then there could be massive upside in store for the group.
- Growth. Woolworths large footprint of stores across Australia makes it one of the largest touch points to the Australian population. This access to literally millions of consumers creates an opportunity to cross-sell other services such as insurance and banking to its customers who come through its doors every week.
- Dividends. The group has a very impressive track record of paying out an ever increasing stream of dividends. In fact, the dividend has been raised every year since 1997. In the 2015 financial year, Woolworths is forecast to pay dividends totalling 145 cents per share (cps), which would represent an 8 cps increase on the prior financial year and suggests the stock is currently trading on a forward yield of 4.9%.
