Woodside Energy Group Ltd (ASX: WDS) shares have experienced plenty of ups and downs in the last 12 months, as we can see on the chart below.
The ASX energy share has captured a lot of investor attention over the past year and a half, with both a spike in energy prices and environmental factors causing a stir.
With that in mind, I'm going to talk about some of the positives and negatives about Woodside shares from my point of view.
Positives of Woodside shares
One of the best reasons to like the business is the strong commitment to paying investors a high level of dividend income, which provides strong 'real' returns each financial year.
In FY24, the ASX energy share is predicted to pay an annual dividend per share of $2.17, according to Commsec. At the current Woodside share price that translates to a grossed-up dividend yield of 8.2%. There aren't too many ASX blue-chip shares that may pay a larger yield than that next year.
The business is capitalising on the elevated energy prices that we're seeing at the moment. In the first half of 2023, it managed to deliver a 6% rise in net profit after tax (NPAT) to US$1.74 billion and a 17% rise in net operating cash flow to US$2.93 billion.
The final thing I'll point out is that the business is working on a number of projects that will help it increase its production and perhaps help the business grow earnings further. Some of those projects include Scarborough, Sangomar, Trion and Julimar-Brunello phase 3.
Negatives of Woodside shares
As I mentioned in my opening remarks, Woodside is facing increasing environmental scrutiny. While this isn't necessarily hurting its financial performance at this stage, it may put off some investors from investing in the ASX oil and gas share. There may be more impacts down the line, though Woodside is working on some hydrogen projects (which should be a long-term positive).
As an investor focused on the long-term, I'm not sure that the prices of LNG and oil will go much higher than it is today, with the world moving towards decarbonisation.
I tend to think of most resource businesses as being cyclical, meaning their profit and share price usually have periods of strength and then periods of weakness. We can see that on the Woodside share price chart below.
We can also see that it's close to its 10-year high. Thus, I wouldn't call this a 'weak' period for the Woodside share price and therefore it may not be the best time to invest. That's because, in my opinion, it's the weak point in the resource cycle that makes it a good time to invest and hopefully achieve good returns with both the share price and the dividend.
According to Commsec, the Woodside share price is valued at 14 times FY23's estimated earnings, with profit projected to fall in FY24 and FY25. If I were looking to buy Woodside shares, I'd want to do it at a price much closer to $30 than it is today.
