Woolworths Group Ltd (ASX: WOW) shares have slumped lower in Tuesday afternoon trade. At the time of writing, the supermarket giant's shares are down around 2% to $34.30 a piece.
It's been a rocky road for Woolworths shares this year, with its value swinging anywhere between $28.84 and a multi-year high of $38.15. After today's decline, the shares are now around 17% higher year to date and 7% higher than 12 months ago.
A key catalyst was the company's third-quarter sales update in early May. For the 13 weeks to the 5th of April, Woolworths reported total sales of $18.1 billion, up 4.5% from Q3 in FY25. Its Australian Food sales were up 5.9% year on year to $13.8 billion.
The company said that underlying trading momentum remained solid, but management noted they have seen "some signs of increased customer caution".
Investors were spooked and quickly offloaded their shares.
Analysts are mostly neutral on the outlook for Woolworths shares.
TradingView data shows that 11 of 18 analysts have a hold rating on Woolworths shares, another 6 have a buy or strong buy rating, and 1 has a sell rating.
The average target price is $34.94, which implies a 2% upside at the time of writing.
But some more bullish analysts think there is still potential for the supermarket's shares to return to the multi-year highs seen earlier this year. The $39 maximum target price implies a potential 14% upside over the next 12 months, at the time of writing.
While the outlook for Woolworths shares may seem unclear, there are reasons investors should consider adding them to their portfolios.
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Are Woolworths shares a good buy for passive income?
Supermarkets are inherently defensive stocks. Even if confidence and customer sentiment fall, inflation keeps rising, and purse strings get even tighter, Australians still need to buy groceries.
The main benefit of Woolworths is its scale. This gives the company strong buying power, an extensive supply chain, and the ability to invest in efficiency over time.
Combined with its defensive nature, Woolworths can generate a relatively stable cash flow regardless of economic conditions. And this means it can continue to pay its shareholders.
How much passive income does the supermarket giant pay its shareholders?
Woolworths typically pays its investors twice-yearly dividends: an interim dividend in April and a final dividend in October.
Woolworths' latest dividend payment in April was 45 cents per security, fully franked.
CommSec's consensus estimates suggest Woolworths could pay a total dividend per share of 99.5 cents in FY26. Based on the current share price of $34.30, that would yield around 2.9%.
The supermarket giant is then forecast to pay shareholders $1.13 in FY27, and $1.28 in FY28.
