The Woodside Energy Group Ltd (ASX: WDS) share price has sunk 18% since 3 March 2023.
With that fall in the valuation, the dividend yield has been pushed higher. Using the last two declared dividends, Woodside's grossed-up dividend yield is around 17%.
That's a huge yield considering how big the business is.
Will the FY23 Woodside dividend be as big?
Woodside benefited enormously in 2022 from the higher energy prices as customers looked for alternative sources of energy away from Russia. The company's operations are now much larger after the gas and oil ASX share acquired the petroleum business of BHP Group Ltd (ASX: BHP).
Commsec estimates currently suggest that Woodside shares could pay an annual dividend per share of $2.55 in the 2023 financial year. This would represent a grossed-up dividend yield of 11.7% for FY23.
In other words, the 2023 annual dividend could be cut by close to a third.
However, while that would represent a fairly large cut, the upcoming dividends could still be big enough payments to excite investors. I think most dividend-focused investors would be happy to receive a double-digit dividend yield.
But, there's more to the attractiveness of a potential investment than just its dividend yield for the upcoming 12 months.
We don't want to get a 10% income return if the share price then drops 20%.
Earnings expected to fall
No one knows what energy prices are going to do, but unless there's another shock to the market – like the Russian one – Woodside may be facing reduced earnings over the next couple of years.
According to Commsec, the business might generate $3.23 of earnings per share (EPS) in FY23, $2.93 in FY24 and $2.59 in FY25.
As might be expected, the Woodside dividend is also predicted to fall in FY24 and FY25.
In FY24 the Woodside dividend is expected to be $2.45 per share, which would be a grossed-up dividend yield of 11.25%.
The FY25 annual Woodside dividend could then be $2.23 per share. This would translate into a grossed-up dividend yield of 10.25%.
On the one hand, the dividend is expected to fall each year. But, at this stage, the dividend yield is still expected to be strong.
Households and businesses still need to use energy, and renewable energy isn't at the stage yet where it can replace coal and gas.
Plus, the company's expansion into other energy like hydrogen could be a good long-term move.
However, with the business still trading at a level around 40% higher than the December 2021 price, there are other ASX dividend shares I'd rather look at for long-term passive income.
