Well, the S&P/ASX 200 Index (INDEXASX: XJO) is back in the green today and the Reserve Bank of Australia (RBA) has just cut interest rates to their lowest levels ever (0.5%).
Many hopeful investors are no doubt predicting that we've 'hit the bottom' and it might be back to business as usual from now on.
Now I don't pretend to know what the fickle, emotionally-charged beast that is the stock market will do tomorrow, let alone next week or next month – but I think it's always prudent to look at companies based on their fundamentals above anything else.
So, let's take a look at a dividend-favourite – Woolworths Group Ltd (ASX: WOW) – and see if it's in the buy zone after last week's market gyrations.
How did Woolworths shares do last week?
Not too well, really. It was only two weeks ago that Woolworths was making fresh new all-time highs – topping out at $43.96. Yesterday, Woolies shares hit $37.73 – a 14.17% turnaround in just over a week. Considering the broader ASX 200 fell by 'only' 11.14%, it wasn't a good week to have been holding Woolworths shares.
Today, the Woolies share price is trending a little higher and is asking $38.22 at the time of writing.
Are Woolworths shares in the buy zone?
The Woolworths share price is definitely looking a lot more attractive than it was a fortnight ago. At the current price, Woolies shares are trading on a price-to-earnings (P/E) ratio of 19.05 (slightly above the current ASX 200 average of 18.56) and a trailing dividend yield of 2.7%, which grosses-up to 3.84% with Woolies' full franking credits included.
I would call this share price a fair value, but definitely not a screaming bargain or even 'on sale'. As last week demonstrated, I don't think Woolworths is positioned to hold up any better than the broader market in the event of a crash (although its dividend might).
By comparison, Woolworths' arch-rival Coles Group Ltd (ASX: COL) is currently trading on a P/E ratio of 17 and a trailing dividend yield of 3.57% (or 5.1% grossed-up). If it's yield you're after, I think Coles offers a more compelling buy at the current time.
Foolish takeaway
I think Woolworths is a good quality business with a strong dividend, but I'm not enticed by the current share price at all, even after last week's dip. I think there are better alternatives out there for investors seeking dividend income today.
