Woolworths Group Ltd (ASX: WOW) shares have enjoyed a strong year of outperformance in 2026.
On Monday afternoon, shares in the S&P/ASX 200 Index (ASX: XJO) supermarket giant were swapping hands for $39.16 apiece. That sees the share price up an impressive 33.1% year to date, smashing the 1.1% gains delivered by the benchmark index over this same time.
Atop those capital gains, Woolies stock is also popular with passive income investors for the company's fully franked dividend payouts.
If you owned Woolworths shares at market close on 24 February, you would have received the fully franked 45 cents per share interim dividend on 16 April. (The stock traded ex-dividend on 25 February.)
But with the ASX 200 stock having surged since plumbing multi-year closing lows in October, is it still a good buy for passive income today?
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Should I buy Woolworths shares for passive income?
Shaw and Partners' James Bills recently ran his slide rule over Woolies stock (courtesy of The Bull). And he expressed concerns over rising costs and competition in the sector.
"Woolworths is facing increasing competitive pressure in the supermarket sector, along with possible margin compression driven by higher operating and supply chain costs," he said.
"While the share price has made a notable recovery since October 2025, the outlook is challenging given increasing cost of living pressures among price sensitive shoppers," Bills added.
And following on the strong share price gains, Bills didn't sound particularly enthusiastic about the stock's passive income status, with Woolies now trading on a 2.3% fully franked trailing dividend yield.
Summarising his sell recommendation on Woolworths shares, he concluded, "With a relatively modest dividend yield and limited short-term catalysts, it may be prudent to reduce exposure and redeploy capital into opportunities with stronger growth prospects."
And he offered another ASX passive income share investors may wish to consider instead.
This ASX passive income share has a 6.2% dividend yield
While recommending selling Woolworths shares, Bills issued a buy recommendation on listed investment company (LIC) Hearts and Minds Investments Ltd (ASX: HM1).
"HM1 offers investors access to a concentrated portfolio of high conviction global equity ideas sourced from leading fund managers across the world," he said.
With the LIC not charging investment fees and instead donating to Australian medical research organisations, Bills added, "The unique structure, combined with its philanthropic component, has attracted some of the industry's top investors, enhancing the quality of stock selection."
On the passive income front, he said, "The portfolio is tilted towards innovative, growth-oriented companies with long-term upside potential. It also pays a fully franked dividend."
At Monday's intraday share price of $3.01, Hearts and Minds shares trade on a 6.2% fully franked trailing dividend yield.
Summarising his buy recommendation on the ASX dividend share, Bills concluded:
HM1 was recently trading at a discount to net tangible assets. In our view, the company provides an appealing entry point for investors seeking exposure to global growth themes with strong management backing.
