Woolworths Group Ltd (ASX: WOW) stock is a popular option for investors looking for a source of passive income.
And it isn't hard to see why the supermarket giant's shares are so popular with income investors.
Woolworths' earnings are among the most defensive you will find on the Australian share market. Whatever is happening in the economy, consumers still need food on their plates and essentials in their cupboards.
This defensiveness was clear for all to see during the pandemic. Woolworths was one of only a handful of companies that were able to pay dividends as normal during the period.
But is it a good option for income investors today? Let's see whether analysts think Woolworths stock is a buy, sell, or hold.
Should you buy Woolworths stock for passive income?
Although the supermarket giant is facing significant scrutiny from regulators right now, the broker community remains reasonably bullish on its shares.
Among the major brokers, the least bullish out there is Ord Minnett with a hold rating and $35.00 price target. Though, this price target is still 6% higher than the current Woolworths share price.
Elsewhere, last week Macquarie put a neutral rating and $37.00 price target on its shares. This implies potential upside of 12% for investors, which isn't bad for neutral!
Then there are analysts at Citi, Goldman Sachs, and Morgan Stanley that all have the equivalent of buy ratings on its shares with price targets offering at least 15% returns. And that doesn't include the passive income you would receive from dividends.
Goldman Sachs is arguably the most bullish broker out there with its buy rating and $40.10 price target. This suggests that upside of 21.5% is possible for investors from current levels.
As for passive income, the broker is forecasting fully franked dividend yields of 3.3% in FY 2025 and then 3.6% in FY 2026.
What is the broker saying?
Goldman believes that risks relating to the ACCC inquiry are fully priced into its shares. Earlier this week, the broker said:
[W]hile we do not take any view on the final outcome, we remain of the view that earnings and valuation risks from the Inquiries are sufficiently priced in and reiterate Buy WOW and Neutral COL.
In light of this, it thinks investors should be focusing on Woolworths' positive outlook and attractive valuation. Goldman recently commented:
We are Buy rated on the stock as we believe the business has among the highest consumer stickiness and loyalty among peers, and hence has strong ability to drive market share gains via its omni-channel advantage, as well as its ability to pass through any cost inflation to protect its margins, beyond market expectations. The stock is trading below its historical average (since 2018), and we see this as a value entry level for a high-quality and defensive stock.
