Today, Woodside shares are asking $29.13 each at the time of writing, down a hefty 2.35% for the day thus far.
At this price, Woodside shares are sporting a monstrous trailing dividend yield of 11.66%.
That's obviously a huge yield to turn down. Especially when you consider that Woodside's dividends usually come fully franked as well (grossing that yield up to a whopping 16.66%).
So let's talk about whether Woodside shares are a buy for this near-12% yield.
Would I buy Woodside shares for that 12% dividend yield today?
The first thing to note is that this yield checks out. Over 2023, Woodside has paid out two dividends, as is the company's norm. The first was the April final dividend of $1.44 per share. The second was the interim dividend from September, worth $1.243 per share.
Those payouts were both drops over 2022's final and interim dividends of $1.46 and $1.60 per share respectively.
However, despite the obvious attraction of this massive dividend yield, I don't own Woodside shares for their dividend income potential. And probably never will.
See, woodside's dividends are highly cyclical. As an energy and oil company, Woodside's profitability is almost entirely dependent on what the price of oil is at any given moment.
As motorists would know, 2022 and 2023 have seen very high oil prices by historical standards, which in turn have allowed Woodside to fund these huge dividends.
But history tells us that when oil prices drop, so too do the dividends from this company. 2022 may have seen a grand total of $3.06 in dividends per share from Woodside stock. But just one year earlier those same shares yielded just 56.3 cents per share. Remember, a dividend yield reflects the past, not the future.
Trading certainty for a high yield?
I like having certainty in my dividend shares. And that's something you can never expect from a cyclical oil company like Woodside.
Over the past four months or so, the Woodside share price has lost around 25% of its value, probably thanks to falling oil prices. If these falls hold, it's highly likely that 2024's dividends will more closely resemble 2021 than 2022 in my view.
Additionally, I would also struggle to justify including Woodside in a dividend portfolio, purely from concerns that it sells products that the world is desperately trying to turn away from.
So no, I don't personally regard Woodside shares as a buy for dividend income today. But that's just me.