Woolworths Group Ltd (ASX: WOW) shares have been garnering increased attention as Australian consumers face a year of high interest rates and continuing high inflation.
That combination is likely to put pressure on discretionary stocks as 2023 unfolds, while ASX consumer staples stocks should fare better. At the end of the day, we all need to eat and provide our households with the essentials.
As the operator of Australia's iconic supermarket, the owner of Big W, and with a growing footprint in the pet food and care business, Woolworths is a leading S&P/ASX 200 Index (ASX: XJO) consumer staple stock.
And one that pays a fully franked, trailing dividend yield of 2.6%.
But with Woolworths shares up 6% since the opening bell on 3 January, is now a good time to buy…or not?
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Is now the time to buy Woolworths shares?
A number of leading analysts believe Woolworths shares are a good buy right now.
Among them, Catapult Wealth portfolio manager Tim Haselum who recommends buying on any share price pullbacks.
Haselum cited Woolies' "strong balance sheet" and the continuing decline in pandemic-related costs as positives for investors:
Several disruptions and abnormal costs during the past two years appear to be ending. We expect COVID-19 costs to continue falling…
The shares also appeal for their defensive qualities. Any price weakness represents a buying opportunity, in our view.
Another bullish outlook on Woolworths shares comes from Goldman Sachs.
The broker sounded a positive note on the strength of the retailer's market position and its digital leadership. Its digital initiatives in particular could help Woolies increase its margins and market share in 2023 and the years ahead.
Goldman Sachs believes Woolworths will lift its dividend payouts in FY 2023 and FY 2024.
Its analysts forecast an FY23 dividend of $1.02 per share and an FY24 dividend payout of $1.13 per share. At the current share price of $34.85, that works out to a forecast yield of 2.9% in this financial year and a yield of 3.2% in the upcoming financial year.
Goldman has a price target of $41.70 on Woolworths shares, some 20% above the current price.
Or not?
However, not everyone is convinced now is the best time to buy Woolworths shares.
Senior investment adviser at Ord Minnett Tony Paterno said investors who already own shares may even want to think about cashing out for a profit.
According to Paterno (quoted by The Bull)
The supermarket giant has entered into an agreement to acquire a 55% equity interest in Petspiration Group, a specialty pet food, accessories and services retailer for $586 million. It builds on the company's long-term strategic goal to offer an ecosystem for everyday needs.
We expect a challenging year for the grocery industry, as shoppers become ever more value conscious. Investors may want to consider taking a profit.
How have Woolworths shares been tracking longer-term?
As you can see in the chart below, Woolworths shares have had a bit of a wild ride over the past 12 months, up just over 1% for the full year. Over the past five years, the ASX 200 retailer has gained 49%.
