On the surface, there is a lot for ASX investors to like about Woodside Energy Group Ltd (ASX: WDS) shares. Woodside is of course the ASX's largest energy share, with large exposure to the oil and gas industries.
It has been a great investment over the past 12 months, with the Woodside share price up a healthy 13.66%. And then there's the monstrous fully-franked dividend yield to consider as well.
Woodside shares currently have a trailing dividend yield of 10.49% on current pricing. That comes fully franked too, which represents a grossed-up yield of over 15%.
So should investors rush out and buy Woodside shares today to secure that massive 10% yield?
Well, that question doesn't exactly have a simple answer. Woodside is one of the most cyclical shares on the ASX 200, thanks to its total exposure to the oil and gas industries. Put simply, if oil and gas command a high price, Woodside rakes in the cash. But when oil and gas are depressed, times quickly get a lot tougher for this share.
To illustrate, let's dive a little deeper into Woodside's dividends.
So yes, this company has been a dividend hero over the past couple of years. That 10.53% yield is authentic, hailing from the final dividend worth $2.15 per share that Woodside shareholders bagged in April this year, as well as the $1.60 per share interim payout that investors received last year.
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Have Woodside shares always been a 10% yielder?
But Woodside's dividends weren't always this high, far from it. The company did pay out $3.06 per share in dividends over 2022, the highest annual total in Woodside's history. But over 2021, investors received a far less impressive 56.3 cents per share. In the preceding years, it was far more common for investors to get an annual total of around $1 per share.
Thus, 2022 and 2023's dividends are arguably a bit of an anomaly, driven by the record prices for oil and gas that we've been seeing recently.
So the question would-be Woodside income investors have to ask today is what kind of dividends is Woodside going to pay out in the future?
Looking at the company's income history, it does look like the massive dividends that we have seen over 2022 and into 2023 can't be considered the norm. As we discussed last week, WTI crude has come down from the US$90 per barrel levels we saw last year to around US$70 per barrel today.
If oil stays at these levels or falls further, I wouldn't be betting on a repeat of 2022's income from Woodside. But then again, if oil starts to climb back up, Woodside shareholders could be in the box seat for even more large payouts.
