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?

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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.

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