Should you buy Woolworths (ASX:WOW) shares in August 2021 for the dividend yield?

Should you buy the company's shares for its upcoming dividend this month?

| More on:
shopping trolley filled with coins representing asx retail share price.ce

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Woolworths Group Ltd (ASX: WOW) share price has travelled higher this year, hitting a record high of $41.27 yesterday. This comes off the back of another round of "pantry stocking" in response to the latest COVID-19 outbreak in Australia.

No doubt, people hoarding to buy food supplies will give the supermarket giant a boost in short-term revenue.

During Monday's market close, Woolworths shares finished the day up 0.59% to $41.02.

Woolworths recent dividend history

Since this time last year, Woolworths has paid total dividends to shareholders of 101 cents per share. This consists of FY20's final dividend of 48 cents per share and the FY21 interim dividend of 53 cents per share.

Based on the current share price of Woolworths, this translates to a dividend yield of around 2.46%. And this doesn't include that all its dividends are fully-franked which is an added bonus in offsetting future tax liabilities.

What to expect for Woolworths upcoming dividend?

While Woolworths isn't due to report its FY21 financial results until 26th August, investors may be curious about what to expect for the upcoming dividend.

According to Goldman Sachs, its team are expecting Woolworths to report full-year revenue of $55,414.5 million. Although this is a 12.5% decline when compared against FY20, it's worth noting that Endeavour Group Ltd (ASX: EDVdemerged from Woolworths in June 2021.

Earnings before interest and tax (EBITDA) is forecasted to come in at $2,795.9 million, down 13% from FY20 ($3,218.7 million).

In line with the earnings, analysts at Goldman Sachs believe the company will pay a full-year dividend of 86 cents per share. When factoring in the FY21 interim dividend payment of 53 cents, this equates to 33 cents for the second half.

How is the Woolworths share price valued?

Goldman Sachs' report in late June downgraded its "buy" rating to "neutral" for Woolworths shares following the outperformance into the demerger. 

The broker noted increased competition amongst existing competitors as a key downside risk. In addition, delayed recovery of population growth and poor management of unwinding elevated costs from 2020 concerned Goldman Sachs.

The investment bank indicated a 12-month price target of $36.80, which implies a 10% downside on the current Woolworths share price.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Dividend Investing

A female coal miner wearing a white hardhat and orange high-vis vest holds a lump of coal and smiles as the Whitehaven Coal share price rises today
Dividend Investing

Invest $10,000 in New Hope shares and get $1,006 in passive income

Many ASX investors buy New Hope shares for their high yielding, fully franked dividends.

Read more »

A man in a suit looks serious while discussing business dealings with a couple as they sit around a computer at a desk in a bank home lending scenario.
Dividend Investing

Forget term deposits and buy these ASX 200 dividend shares

Analysts have good things to say about these dividend options.

Read more »

An Australian farmer wearing a beaten-up akubra hat and work shirt leans on a fence with livestock in the background and a blue sky above.

Should you buy this ASX REIT for its 6% dividend yield?

This expert is telling investors to take advantage of a 6% yield...

Read more »

A happy construction worker or miner holds a fistfull of Australian money, indicating a dividends windfall
Dividend Investing

Here's the BHP dividend forecast through to 2028

Will the Big Australian continue to reward shareholders with big dividends?

Read more »

A man holding a cup of coffee puts his thumb up and smiles while at laptop.
Dividend Investing

Analysts say these ASX 200 dividend stocks are best buys in April

What are analysts saying about these high quality companies?

Read more »

A man in a business suit whose face isn't shown hands over two australian hundred dollar notes from a pile of notes in his other hand to an outstretched hand of another person.
Dividend Investing

Buy these ASX dividend shares for income

Analysts have put buy ratings on these income stocks.

Read more »

footwear asx share price on watch represented by look holding shoe and looking intently
Consumer Staples & Discretionary Shares

Does this ASX 300 retail stock really have a 7.6% dividend yield right now?

Is a 7.67% dividend yield too good to be true?

Read more »

A man in his office leans back in his chair with his hands behind his head looking out his window at the city, sitting back and relaxed, confident in his ASX share investments for the long term.
Dividend Investing

Brokers say these ASX 300 dividend stocks are top buys

Attractive dividend yields could be on offer with these shares.

Read more »