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How does the supermarket giant's dividends compare to its major competitor's?
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Brooke has been a Motley Fool contributor since early 2021. She holds a Bachelor of Communication with specialisations in journalism and international studies from Charles Sturt University. Brooke aims to inform and excite Aussies keen to grow their wealth by investing in ASX companies. When not writing or researching, you'll likely find Brooke gallivanting around South East Queensland.
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The share price of dividend-paying supermarket operator Woolworths Group Ltd (ASX: WOW) has underperformed the broader S&P/ASX 200 Index (ASX: XJO) so far this year.
The stock has dumped around 13% since the start of 2022, while the ASX 200 has slumped 8%. Right now, the Woolworths share price is trading at $33.48.
Could its recent downturn make Woolworths shares a dividend buy? Let's see what experts think.
Well, that depends on who you ask.
Top brokers Goldman Sachs and Citi are both bullish on the stock, despite being disappointed by its recent first-quarter earnings.
Woolworths posted a 1.8% increase in group sales for the three months ended 30 September, coming in at around $16.4 billion.
Its key Australian and New Zealand food businesses underperformed despite inflationary effects. Though, their slump was offset by growth in the company's Big W and business-to-business sectors.
Goldman Sachs commented:
Despite a noisy and softer [first quarter], we remain confident that [Woolworths] is the superior operator within [Australian] supermarkets.
Both Goldman Sachs and Citi trimmed their price targets for Woolworths shares on the back of the update, reducing them to $41.70 and $39.50 respectively, my Fool colleague James reports. Though, that still represents a potential upside of 18% to 24%.
Comparatively, Morgans is decidedly more bearish.
The broker dropped its price target on the stock to $34.10 and retained its hold rating on the back of the supermarket giant's recent release. It said:
[W]e continue to see the stock as fully valued and continue to prefer Coles Group Ltd (ASX: COL) in the Staples sector.
Speaking of Coles, its dividends far surpass those offered by its larger peer. It's currently trading with a dividend yield of 3.8%, having handed investors 63 cents per share in dividends in financial year 2022.
That's superior to the 2.7% yield currently on offer from Woolworths shares. It paid out 92 cents per share in dividends last financial year.
Thus, a dividend-focused investor might prefer Coles shares over Woolworths right now.
