Mining and metals giant BHP Group Ltd (ASX: BHP) has been regarded as a strong ASX dividend stock for some time. But there is another oil and gas producer that I think is a better alternative for passive-income-seeking investors.
Woodside Petroleum Ltd (ASX: WDS) is the largest oil and gas producer in Australia. The company actually acquired BHP's oil and gas portfolio in June 2022. The move established Woodside as the largest ASX-listed energy company and a top 10 global independent energy company.
At the time of writing on Thursday morning, Woodside shares are 1.12% higher and changing hands for $24.43 a piece. For the year, the shares are now up 2.09%.
The shares came roaring back last week after a number of announcements and market updates pushed the share price higher. The oil producer released its September quarterly update in the middle of the week. It revealed a 1% increase in quarterly production and a 3% increase in revenue. Woodside also lifted its full-year production guidance to 192 to 197 Mmboe, up from the prior guidance of 188 to 195 Mmboe.
Shortly after the announcement, management at Woodside announced that it had entered a strategic partnership with US energy infrastructure firm Williams Companies Inc (NYSE: WMB) for Woodside's Louisiana LNG project, securing US$250 million in proceeds.
The ASX dividend stock's share price was also boosted by news that US President Donald Trump followed through on threats to impose harsher sanctions on Russian oil producers. A 7% hike in Brent crude oil prices on Friday afternoon also acted as another tailwind for Woodside shares.
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What about Woodside's dividend yield?
When it comes to paying out dividend yields, the oil producer provides an impressive passive income for investors at over double the ASX 200 Index yield.
In April this year, Woodside paid a fully franked final dividend of 84.9 cents, followed by an interim dividend of 81.8 cents per share in September. That equates to a total annual payout of $1.667 per share for 2025, which is the equivalent of a fully franked trailing dividend yield of 6.9%.
For context, the ASX 200 Index offers a dividend yield of 3.4% and BHP paid a fully franked dividend yield of 2.2% in FY25. Its grossed-up dividend yield, including franking credits, was 3.1%.
Going forward, UBS forecasts that the Woodside dividend per share could decline to US 52 cents per share. This translates into a forward grossed-up dividend yield of around 4.6%.
The broker expects the dividend per share could rise to US 79 cents in FY27, and higher again to US 95 cents in FY28.
What do analysts think of the ASX dividend stock?
Morgans recently updated its outlook on Woodside shares to a buy and raised its price target to $30.50. It cited strong operational results and the latest strategic partnership for the uplift.
That represents a potential upside of 24.8% for investors over the next 12 months, at the time of writing.
