A fall in the Woolworths Group Ltd (ASX: WOW) share price has opened up an opportunity for investors to buy the supermarket business at a cheaper valuation for passive income.
As the above chart shows, the Woolworths share price has fallen by 20% since 21 August 2025, which I'd describe as a large drop for a business that's meant to be a defensive ASX share.
At the moment, it seems that Woolworths is losing out to Coles Group Ltd (ASX: COL). Coles' sales growth is outperforming Woolworths.
However, just because the supermarket business is underperforming its key rival, doesn't mean it can't still be a good option for passive income.
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Dividend growth expected for Woolworths shares
In FY25, the business declared an annual dividend per share of 84 cents per share. It's expected to get better from here.
Analyst projections suggest the Woolworths annual dividend per share could steadily increase over the next few years. The forecast on Commsec suggests payout growth to 99 cents per share in FY26, representing 18% growth year-over-year.
In the 2027 financial year, it could see another dividend hike of 14% to $1.13 per share.
In FY28, owners of Woolworths shares could see another dividend increase to $1.35, representing a year-over-year increase of around 20%.
Passive income from a $10,000 investment
Let's focus in on what FY26 could look like in terms of the passive income.
If the business does pay an annual dividend per share of 99 cents, that would translate into a dividend yield of 3.7% excluding franking credits and 5.3% including franking credits, at the time of writing.
With a $10,000 investment in Woolworths shares, that would translate to approximately $370 of cash dividends and $530 of grossed-up dividend income, including franking credits.
Is this a good time to invest in Woolworths shares?
Analysts currently don't seem overly bullish on the business. According to CMC Markets, there are currently nine hold ratings on the business with two buy ratings.
But, the average price target of those analysts does suggest a positive outcome. A price target is where the broker thinks the share price will be in 12 months from now.
CMC Markets says the average price target is $29.89, suggesting a solid double-digit return (in percentage terms) at the time of writing.
Even the lowest price target of those price targets of $28.25 suggests a potential positive outcome over the next year.
I don't expect Woolworths shares to smash the market in the next few years. But, this could be a good time to consider the supermarket business for passive income.
