Should you buy Woolworths shares for the 'steady dividends'?

A leading analyst provides his outlook for Woolworths rebounding shares.

Woolworths Group Ltd (ASX: WOW) shares are marching higher.

Shares in the S&P/ASX 200 Index (ASX: XJO) supermarket giant closed yesterday trading for $37.82. In early afternoon trade on Wednesday, shares are changing hands for $38.17 apiece, up 0.9%.

For some context, the ASX 200 is down 0.8% at this same time.

Today's outperformance is par for the course in 2026. Woolworths shares are now up 29.8% year to date, charging ahead of the 1.7% gains posted by the benchmark index this calendar year.

Atop those welcome capital gains, Woolworths is also popular with passive income investors for the stock's reliable, twice yearly dividend payments. Woolworths currently trades on a 2.4% fully franked trailing dividend yield.

Which brings us back to our headline question.

Woman customer and grocery shopping cart in supermarket store, retail outlet or mall shop. Female shopper pushing trolley in shelf aisle to buy discount groceries, sale goods and brand offers.

Image source: Getty Images

Should you buy Woolworths shares for passive income?

Red Leaf Securities' John Athanasiou recently analysed the outlook for the Aussie supermarket giant (courtesy of The Bull).

"Australia's largest supermarket operator offers stable defensive earnings and a strong balance sheet," he said.

As for the passive income on offer, Athanasiou added, "It benefits from everyday demand and a dominant position in grocery retail supporting steady cash flows and dividends."

But he isn't ready to pull the buy trigger just now.

Explaining his hold recommendation on Woolworths shares, Athanasiou concluded:

However, margin pressure from cost inflation and competitive discounting limits growth prospects. While same store sales growth remains moderate, the company's resilience in consumer staples provides a solid foundation.

WOW is a reliable long-term holding, but lacks significant upside catalysts in the absence of operational improvements or digital expansion initiatives.

What's the latest from the ASX 200 supermarket?

Woolworths reported its half year results (H1 FY 2026) on 25 February.

Highlights for the six months to 4 January (before significant items) included a 3.4% year-on-year increase in sales to $37.14 billion. And earnings before interest and tax (EBIT) of $1.66 billion increased by 14.4%.

On the bottom line, Woolworths reported a half year net profit after tax (NPAT) of $859 million, up 16.4% from H1 FY 2025.

That saw management up the fully franked interim dividend payout by 15.4% to 45 cents a share.

"We are making progress on the strategy we outlined in August and have invested in value, our fresh offer, On Demand convenience and in-store execution," Woolies CEO Amanda Bardwell said.

Woolworths shares closed up 13.0% on the day of the results release.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Woolworths Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Broker Notes

Two brokers analysing stocks.
Broker Notes

Buy, hold, sell: Megaport, Northern Star, Woolworths shares

Experts explain their ratings on these three ASX 200 stocks.

Read more »

A smiling woman sips coffee at a cafe ready to learn about ASX investing concepts.
Broker Notes

Buy, hold, sell: Myer, Develop Global, Netwealth shares

Let's check out some new stock tips from the experts.

Read more »

Businesswoman working with laptop and documents in office, with virtual finance related graphs and charts.
Broker Notes

Top brokers name 3 ASX shares to buy next week

Brokers gave buy ratings to these ASX shares last week. Why are they bullish?

Read more »

REIT on wooden circles with real estate investment trust written above on a yellow background.
REITs

6 ASX REITs just hit 52-week lows. Do any brokers say buy?

Several ASX real estate investment trusts (REITs) have hit 52-week lows as the property sector underperforms the market on Friday.…

Read more »

A financial expert or broker looks worried as he checks out a graph showing market volatility.
Broker Notes

Buy, hold, sell: CBA, Capstone Copper, Codan shares

Let's take a look at some new ratings from the experts.

Read more »

a woman peers over a surface with a happy, curious look on her face with eyes wide as though she is overhearing something.
Broker Notes

5 ASX 200 shares brokers tip to rocket 25% to 77%

Looking for buy-the-dip opportunities in today's weak market? Experts reveal their buy calls.

Read more »

Young successful engineer, with blueprints, notepad, and digital tablet, observing the project implementation on construction site and in mine.
Broker Notes

Morgans tips 290% upside for this up-and-coming ASX copper company

This company is in the right place at the right time, the broker says.

Read more »

A woman in a red dress holding up a red graph.
Broker Notes

In a tough retail environment, what's the outlook for Wesfarmers shares?

Analysts argue the major retailer is resilient in the face of tough trading conditions.

Read more »