The Woolworths Group Ltd (ASX: WOW) share price has had a stellar 2019 so far and if all remains on track, seems set for a stellar finish to the year to boot. WOW shares started the year off at $29.15 but are going for $37.64 at the time of writing – a YTD gain of more than 30% if you throw in dividends and franking credits.
In fact, WOW shares broke a new all-time high just 2 weeks ago – rising above the $40 mark for the first time ever and printing a new high of $40.04. Anyone who bought Woolworths shares back in 2016 for just over $20 a pop would have doubled their money in just over 3 years. Not bad for a blue-chip like Woolies.
But at today's pricing, is there enough WOW factor left for Woolworths for a buy today, or indeed for 2020? Let's look at the good and the not-so-good.
The good
For me, there is a lot to like about Woolworths, especially as a dividend stock. The grocery/supermarket business is a relatively defensive one, so WOW shareholders won't (or shouldn't) be too concerned if a recession or downturn in the business cycle takes hold.
In an industry awash with fierce competition from the likes of arch-rival Coles Group Ltd (ASX: COL) as well as Aldi and Costco, Woolies seems to have held onto its market share quite well. This is a very good quality for a business to possess – it's something that Warren Buffett likes to call a 'moat'.
Woolworths also pays a decent dividend, which has been growing since 2016 and came in at $1.02 per share this year. On current prices, this translates into a yield of 2.71% – or 3.87% grossed-up.
The not-so-good
Woolies is not what I would call a growth business. The supermarket industry has more or less reached a point of saturation in Australia. There are only so many corners you can put a new Woolies on and expect results. The main drivers that I see for the company going forward are population growth and cost-cutting.
The current WOW share price is also an orange flag for me. At $37.54, Woolworths shares are trading on 33 times company earnings. Since the market average is currently around 18, I would say that this indicates that the market is seeing significant growth in the future – growth that eludes this writer's eyes.
Foolish takeaway
All in all, I see Woolies as a good company at a not-so-good price at the current time. A price-to-earnings ratio of 33 is a price I would struggle to pay for most companies, let alone one of the bluest blue-chips on the market today. Thus, it's a stock I'll be putting on the watch list for now.
