As an ASX 200 blue chip share, Woolworths Group Ltd (ASX: WOW) has a well-founded reputation as an investment that can deliver both capital gains and dividends to ASX investors. Indeed, Woolworths stock has delivered healthy amounts of both over the past decade or two:
Today, this ASX consumer staples giant sits on top of Australia's grocery and supermarket industry, with a higher market share and dominance over its rivals like Coles Group Ltd (ASX: COL).
But just because a company has been successful in the past does not mean it will automatically be a good investment going forward.
So today, let's examine whether the Woolworths share price is a buy.
Buy Woolworths stock: ASX broker
Well, as you might have gathered from the headline, at least one ASX broker is bullish on Woolies shares today. As we covered this week, investment bank and broker Goldman Sachs recently came out with not just a buy rating on Woolworths, but a conviction buy rating.
Goldman has a strong view on Woolworths shares thanks to this business' strong market position and digital prowess. The broker reckons these will enable Woolies to keep its perch at the top of the Australian grocery market and support higher margins in the future.
That's good news for Woowlorths' profitability if Goldman is on the money, which will in turn lead to higher dividends.
Goldman Sachs gives the Woolworths stock price a 12-month target of $41 a share. If realised, that would represent a potential upside of around 10.6% from where the shares are today, not including dividend returns.
Speaking of dividends, Goldman is also bullish on the future income potential of Woolworths shares. Today, Woolies has a trailing dividend yield of 2.67%, fully franked. That stems from the supermarket operator's latest two dividend payments.
These include last year's final dividend of 53 cents per share, as well as the interim dividend of 46 cents per share that investors will bag next month.
But Goldman reckons Woolies will be able to ratchet these payments up substantially in coming years. The broker has a total of $1.03 per share pencilled in for FY2023, and $1.16 per share for FY2024.
No doubt investors will be very happy to hear this news. But we'll have to wait, watch and see if Goldman turns out to be on the money here.
