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Woolworths Group Ltd's Dividend Analysis

Assessing the Sustainability of Woolworths Group Ltd's Upcoming Dividend

Woolworths Group Ltd (WOLWF) recently announced a dividend of $0.47 per share, payable on 2024-04-11, with the ex-dividend date set for 2024-02-28. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Woolworths Group Ltd's dividend performance and assess its sustainability.

What Does Woolworths Group Ltd Do?

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Woolworths Group Ltd is Australia's largest retailer, with operations that include supermarkets in Australia and New Zealand, as well as the Big W discount department stores. The Australian food division is the primary contributor to the group's EBIT, followed by New Zealand supermarkets, while Big W offers a smaller contribution to the overall earnings.

Woolworths Group Ltd's Dividend Analysis
Woolworths Group Ltd's Dividend Analysis

A Glimpse at Woolworths Group Ltd's Dividend History

Woolworths Group Ltd has maintained a consistent dividend payment record since 2020, with dividends currently distributed on a bi-annual basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.

Breaking Down Woolworths Group Ltd's Dividend Yield and Growth

As of today, Woolworths Group Ltd currently has a 12-month trailing dividend yield of 3.16% and a 12-month forward dividend yield of 2.85%, suggesting an expectation of decreased dividend payments over the next 12 months.

Over the past three years, Woolworths Group Ltd's annual dividend growth rate was -1.30%. Extended to a five-year horizon, this rate increased to 0.80% per year. And over the past decade, Woolworths Group Ltd's annual dividends per share growth rate stands at -3.30%.

Based on Woolworths Group Ltd's dividend yield and five-year growth rate, the 5-year yield on cost of Woolworths Group Ltd stock as of today is approximately 3.29%.

Woolworths Group Ltd's Dividend Analysis
Woolworths Group Ltd's Dividend Analysis

The Sustainability Question: Payout Ratio and Profitability

To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-12-31, Woolworths Group Ltd's dividend payout ratio is 77.44, which may suggest that the company's dividend may not be sustainable.

Woolworths Group Ltd's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Woolworths Group Ltd's profitability 6 out of 10 as of 2023-12-31, suggesting fair profitability. The company has reported net profit in 9 years out of the past 10 years.

Growth Metrics: The Future Outlook

To ensure the sustainability of dividends, a company must have robust growth metrics. Woolworths Group Ltd's growth rank of 6 out of 10 suggests that the company has a fair growth outlook.

Revenue is the lifeblood of any company, and Woolworths Group Ltd's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Woolworths Group Ltd's revenue has increased by approximately 1.40% per year on average, a rate that underperforms approximately 67.01% of global competitors.

The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Woolworths Group Ltd's earnings increased by approximately 3.50% per year on average, a rate that underperforms approximately 68.31% of global competitors.

Lastly, the company's 5-year EBITDA growth rate of 1.00%, which underperforms approximately 75.86% of global competitors.

Looking Ahead: Dividend Prospects for Woolworths Group Ltd

Considering Woolworths Group Ltd's dividend payments, growth rate, payout ratio, profitability, and growth metrics, investors should weigh these factors carefully. While the company has a history of consistent dividend payments, the negative growth rates and the high payout ratio could be areas of concern. The fair profitability and growth outlook provide some reassurance, but the underperformance in revenue and earnings growth compared to global competitors might raise questions about long-term sustainability. Value investors should keep a close eye on Woolworths Group Ltd's financial health and market position to make informed decisions about their investment portfolios.

GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.

This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.

This article first appeared on GuruFocus.