How safe is the Woolworths dividend?

Is Woolworths a good option for income investors right now?

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The Woolworths Group Ltd (ASX: WOW) dividend is a popular option for income investors and it isn't hard to see why.

Every year, the retail giant shares a decent portion of its profits with shareholders.

And, as we saw during the pandemic, Woolworths is a bit of an all-weather stock. Whatever is happening in the economy, consumers need their staples.

Furthermore, as we have seen during this period of high inflation, Woolworths can pass on higher costs to consumers, much to their dislike.

So does this make the Woolworths dividend one of the safest options for investors on the Australian share market?

Is the Woolworths dividend safe?

Matthew Lattin from Marcus Today is a fan of Woolworths and appears to see the retailer's dividend as a safe option for income investors.

According to the Bull, Lattin has labelled the retail giant as a buy and feels its "dividend payout is sustainable."

One broker that agrees with this view is Goldman Sachs. Its analysts are currently forecasting high single-digit earnings and dividend growth each year through to FY 2026.

The broker has pencilled in the following for the Woolworths dividend:

  • FY 2023A: $1.04 per share
  • FY 2024E: $1.12 per share
  • FY 2025E: $1.22 per share
  • FY 2026E: $1.32 per share

Based on the current Woolworths share price of $37.67, this will mean yields of 3%, 3.2%, and 3.5%, respectively, over the next three years.

Goldman also sees decent upside for Woolworths' shares over the next 12 months. It has a buy rating and a $42 price target on them, which implies a potential upside of 11.5% for investors.

Combined with its dividend, this suggests a total 12-month return of 14.5%.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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