How does the Woolworths (ASX:WOW) dividend compare to its sector?

How much is Woolworths’ dividend worth today?

| More on:
Two couples race each other in supermarket trollies

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

As a major S&P/ASX 200 Index (ASX: XJO) blue chip share, Woolworths Group Ltd (ASX: WOW) shares have long held a reputation for being an ASX 200 heavyweight when it comes to dividends. But how does this reputation hold up today?

At the time of writing, the Woolworths share price has lost 0.69% this Monday and is going for $41.70 a share. That’s still pretty close to the company’s all-time high of ~$42 that we saw last week. That figure takes into account the recent demerger of Endeavor Group Ltd (ASX: EDV) of course.

So at this current share price, Woolworths offers a headline dividend yield of 2.43%.

Where does this come from? Well, Woolworths’ past 2 dividends. The grocery giant paid out an interim dividend of 53 cents per share in March of this year. Before that, its previous dividend payment was the final dividend of 48 cents per share that the company paid out in September last year.

Putting those two payments against the current Woolworths share price, and we get a yield of 2.43%. That yield grosses-up to 3.47% if we include the value of Woolworths’ full franking credits.

So how dies this yield compare to Woolies’ peers?

Well, let’s take a look.

WOW, look at that dividend!

So Woolworths’ most obvious peers are its rivals in the grocery space – Coles Group Ltd (ASX: COL) and Metcash Ltd (ASX: MTS). Coles competes with Woolworths with its own chain of grocery supermarkets, while Metcash is another competitor with its network of IGA-branded stores across the country.

So at the current pricing, Coles currently offers a dividend yield of 3.24%., or 4.63% grossed-up with full franking.

That comes from Coles’ two most recent dividends: an interim payout of 33 cents per share in March 2021, and a final dividend of 28 cents per share that shareholders will see hit their bank accounts in September.

In Metcash’s case, this company offers a current yield of 4.22% on current pricing, or 6.03% grossed-up. That comes from Metcash’s past two dividends of 8 cents and 9.5 cents per share respectively.

Why is the Woolworths dividend so low?

So you might notice that the Woolworths dividend seems to be a lot lower than its peers in its sector. 2.43% against 3.24% or 4.22%. So what’s going on here?

Well, in these three companies’ case, it seems to be related to the earnings multiple investors are currently willing to pay. Take the price-to-earnings (P/E) ratio of Woolworths. It’s currently sitting at 37.12. Compare that to Coles’ current P/E ratio of 25.01 or Metcash’s 17.77.

This tells us that investors are currently willing to pay a higher share price relative to earnings for Woolworths than Coles or Metcash. That means that investors are also willing to accept a lower dividend yield for Woolworths shares as a result.

Motley Fool contributor Sebastian Bowen 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 owns shares of and has recommended COLESGROUP DEF SET. 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 blockchain investor sits at his desk with a laptop computer open and a phone checking information from a booklet in a home office setting.
Dividend Investing

Why is the Suncorp share price slipping today?

What's going on with Suncorp shares today?

Read more »

A man in a suit smiles at the yellow piggy bank he holds in his hand.
Bank Shares

How big is the CBA dividend yield right now?

How good is CBA’s dividend yield?

Read more »

A woman sits at her computer with her hand to her mouth and a contemplative smile on her face as she reads about the performance of Allkem shares on her computer
Dividend Investing

2 ASX 200 dividend shares with ~7%+ yields that experts rate as buys

These ASX 200 dividend shares have been tipped to pay big dividends...

Read more »

A young man wearing glasses and a denim shirt sits at his desk and raises his fists and screams with delight as he watches the ResApp share price go 50% higher today
Dividend Investing

Top ASX dividend shares to buy in August 2022

We could all use some extra income, right?

Read more »

A businesswoman weighs up the stack of cash she receives, with the pile in one hand significantly more than the other hand.
Dividend Investing

Everything you need to know about the latest Telstra dividend

How big will the Telstra dividend be?

Read more »

Miner holding cash which represents dividends.
Dividend Investing

Do any ASX lithium shares pay dividends?

These three lithium shares offer regular payouts to investors.

Read more »

A man wearing a shirt, tie and hard hat sits in an office and marks dates in his diary.
Dividend Investing

Why is the Rio Tinto share price sinking today?

Why is this mining giant deep in the red today?

Read more »

Four investors stand in a line holding cash fanned in their hands with thoughtful looks on their faces.
Dividend Investing

Guess how much AGL has paid in dividends over the past 5 years?

Have AGL dividends held shareholders in good stead?

Read more »