‘Woodside will distribute US$20bn in dividends over the coming decade’: Morgan Stanley

Off-market buy backs, mergers and acquisitions, and US$20 billion of dividends are predicted.

| More on:
man laying on his couch with bundles of money and extremely ecstatic about high dividend returns

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

Key points

  • Morgan Stanley is reportedly expecting big things from Woodside in the future
  • The broker is said to expect the energy giant to pay out more than US$20 billion in dividends over the next 10 years, trading with a dividend yield of between 10% and 12%
  • It's also flagged potential off-market share buybacks, mergers, and acquisitions 

Owners of Woodside Energy Group Ltd (ASX: WDS) shares, rejoice! Morgan Stanley has reportedly tipped the S&P/ASX 200 Index (ASX: XJO) company to be a future dividend machine.

The newly merged energy giant currently has a market capitalisation of more than $60 billion. But that could be just the beginning.

Let’s take a look at what Morgan Stanley reportedly expects from the fresh-faced juggernaut over the coming years.

Woodside shares tipped to pay out US$20bn of dividends

Off-market buybacks, mergers and acquisitions, and US$20 billion (AU$27.8 billion) of dividends, oh my! Morgan Stanley reportedly sees green pastures for Woodside shares.

The top broker has tipped the ASX 200 company as a “must-own” energy play, particularly for gas-focused investors, The Australian reports.

“It has some of the strongest leverage to oil and gas prices globally and the structural tailwinds behind gas may see its global discount reverse,” the broker reportedly told clients.

But what about dividends? Morgan Stanley is said to expect the company to provide billions of dollars in payouts over the coming years. The publication quoted it as saying:

We forecast Woodside will distribute US$20 billion in dividends over the coming decade, providing it with another US$20 billion to re-invest in growth, diversify, and pursue further capital management.

In addition, we forecast a strong dividend yield in the 10% [to] 12% range over the next few years should energy prices remain elevated.

The company is also tipped to start a journey of growth with its newly reset balance sheet.

The broker reportedly believes the company could execute US$4 billion of off-market share buybacks over the next 18 months. That could lift to between US$6 billion and US$8 billion if it capitalises on potential Asian gas assets.

And that’s not all. Woodside’s current position means it could be on the lookout for new mergers and acquisitions, according to the broker.

“A strong balance sheet also puts the company in a position of strength to execute its [merger and acquisition] processes which could potentially provide look-through value to its portfolio,” Morgan Stanley was quoted as saying.

Morgan Stanley reportedly has a $40 price target and an ‘overweight’ rating on Woodside shares.

At Monday’s close, the Woodside share price was $32.83.

Motley Fool contributor Brooke Cooper 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 Scott Phillips.

More on Broker Notes

ASX shares Business man marking buy on board and underlining it
Broker Notes

Leading brokers name 3 ASX shares to buy today

Here's why brokers rate these ASX shares as buys...

Read more »

Four businessmen in suits pose together in a martial arts style pose as if ready to engage in competition or spring into a fight.
Broker Notes

Is this ASX bank share a better buy than the big four banks?

One alternative bank share might be looking too cheap to ignore.

Read more »

A man in his 30s holds his laptop and operates it with his other hand as he has a look of pleasant surprise on his face as though he is learning something new or finding hidden value in something on the screen.
Resources Shares

Is the Santos share price a buy following the energy giant’s latest acquisition?

Santos has slipped, should investors seize the opportunity?

Read more »

Man sitting in a plane seat works on his laptop.
Travel Shares

Do experts think the Flight Centre share price is ready for imminent takeoff?

We consider whether this ASX travel share has the ticket to growth.

Read more »

Man sitting at a laptop in an office throws a book into the air and cheers.
Broker Notes

2 quality ASX shares Wilsons just bought

One medical and one lithium stock have had their exposures increased in the advisory's portfolio.

Read more »

happy investor, share price rise, increase, up
Small Cap Shares

2 exciting small cap ASX shares to buy according to brokers

These small cap ASX shares have been named as buys by brokers...

Read more »

A white and black clock face is shown with three hands saying Time to Buy reflecting Citi's view that it's time to buy ASX 200 banks
Broker Notes

Top brokers name 3 ASX shares to buy next week

Brokers are feeling positive about these ASX shares...

Read more »

A group of five people dressed in black business suits scrabble in a flurry of banknotes that are whirling around them, some in the air, others on the ground as some of them bend to pick up the money.
Technology Shares

2 ASX tech shares about to go cash-flow positive

After massive interest rate rises, using your own cash to operate is so much better than borrowing to survive.

Read more »