Owning Woodside Energy Group Ltd (ASX: WDS) shares could be an underrated choice for passive income in the coming years. As one of the largest oil and gas businesses in the Asia Pacific region, the business is able to give useful exposure to energy markets.
Woodside has energy projects around the world, including Australia, Africa and North America.
Given the ongoing situation in the Middle East, I think Woodside is an interesting one to consider in the current environment. The ASX energy share could pay large dividend income in the coming reporting periods, so let's look at the passive income projections.
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Upcoming dividends
Higher energy prices could significantly boost the company's earnings and dividends.
According to the projection on Commsec, the business could deliver pleasing passive income for the next few financial years. Woodside's annual dividend per share is forecast to be $1.76 in 2026 – the company's FY26 finishes in December 2026.
That forecast for the 2026 financial year translates into a grossed-up dividend yield of 7.6%, including franking credits, at the time of writing.
The 2027 financial year payout could be even better. According to the estimate on Commsec, Woodside is projected to pay an annual dividend per share of $2.14 in the 2027 financial year. That would be a grossed-up dividend yield of 9.3%, including franking credits.
Not many businesses inside the S&P/ASX 200 Index (ASX: XJO) are projected to pay passive income that large in FY27. It looks like a particularly large dividend yield when compared to the yields of other ASX blue-chip shares of Commonwealth Bank of Australia (ASX: CBA) and BHP Group Ltd (ASX: BHP).
A $4,000 investment in Woodside shares
With a large dividend yield, it's clear that investors can unlock significant dividend income. We're going to look at what a $4,000 investment could unlock for investors.
By investing in $4,000 in the ASX energy share today, an investor may be able to buy 121 Woodside shares, which could unlock around $260 dividend cash and $361.91 dividend income overall (including franking credits).
That's an impressive level of investment income, in my view.
Is this a good time to invest in the ASX energy share?
Analysts have given their view on the business amid the events in the Middle East.
According to CMC Invest, there have been nine analyst ratings on the business within the last three months. The average price target from those experts is $31.34, implying a possible decline of 4% over the next year.
So, while it may provide significant passive income, the experts seem to think it's fully priced. Therefore, there could be better ASX share opportunities out there to buy.
