Woodside Energy Group Ltd (ASX: WDS) shares have been out of form this year.
So much so, with the energy giant's shares down 18% since this time last year and currently changing hands for $27.92, they are trading within sight of their two-year low of $27.03.
While this is disappointing for shareholders, could it prove to be a great time to buy for non-shareholders?
To find out, let's see what a $10,000 investment in Woodside shares could become in one year based on what a leading broker is saying about the country's leading energy producer.
Investing $10,000 into Woodside shares
Firstly, with the company's shares fetching $27.92, you would need to invest $10,023.28 to end up with 359 units.
According to a note out of Morgans, its analysts believe that Woodside's shares are extremely undervalued and big returns could be on the cards over the next 12 months.
The note reveals that the broker has the company on its best ideas list with an add rating and a $36.00 price target.
If its shares were to rise to that level, it would value those 359 units at a sizeable $12,924. That's almost 30% or $3,000 greater than what you started with.
Already it is looking like a very fruitful investment. But there's still more to come according to the broker.
Morgans is forecasting fully franked dividends of $1.25 per share in FY 2024 and then $1.57 per share in FY 2025. This represents attractive dividend yields of 4.5% and 5.6%, respectively.
This will add income of $448.75 this year and then $563.63 in 2025. The former boosts the total 12-month return to approximately $3,350, which represents a return on investment of around 33%.
Why is the broker bullish on Woodside?
Morgans thinks that recent share price weakness has created a buying opportunity for investors. Especially given the quality of its earnings and an improving outlook for a key growth project. It explains:
A tier 1 upstream oil and gas operator with high-quality earnings that we see as likely to continue pursuing an opportunistic acquisition strategy. WDS's share price has been under pressure in recent months from a combination of oil price volatility and approval issues at Scarborough, its key offshore growth project. With both of those factors now having moderated, with the pullback in oil prices moderating and work at Scarborough back underway, we see now as a good time to add to positions. Increasing our conviction in our call is the progress WDS is making through the current capex phase, while maintaining a healthy balance sheet and healthy dividend profile. WDS still has to address long-term issues in its fundamentals (such as declining production from key projects NWS/Pluto), but will still generate substantial high-quality earnings for years to come.
