Do Woodside shares really have a 6% dividend yield right now?

Is the petroleum company's dividend yield too good to be true?

| More on:
A man sits in deep thought with a pen held to his lips as he ponders his computer screen with a laptop open next to him on his desk in a home office environment.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Woodside Energy shares have had a dramatic 12 months
  • This oil share has vastly outperformed the ASX 200 over the past year
  • We check whether Woodside shares are really offering a 6% dividend yield 

Few ASX 200 shares have had as dramatic a year as the Woodside Energy Group Ltd (ASX: WDS) share price. For one, over the past 12 months, Woodside shares have gained an impressive 40.25%. That certainly looks good against the 8.3% loss that the S&P/ASX 200 Index (ASX: XJO) recorded over the same period.

But then there's also the blockbuster merger with BHP Group Ltd (ASX: BHP)'s petroleum division to consider as well. Back in May, the old Woodside Petroleum Ltd became Woodside Energy after BHP spun out its petroleum division. All BHP shareholders at the time received one new Woodside Energy share for every 5.534 BHP shares owned.

As we covered at the time, this tie-up saw Woodside become a "top 10 global energy producer with over two billion barrels of proven and probable reserves and annual EBITDA approaching US$5 billion".

So as it stands today, the 'new' Woodside has a market capitalisation of $59.8 billion. But is Woodside's trailing dividend yield of 5.94% too good to be true?

Well, this trailing yield comes from the last two dividend payments this oil share has doled out. These were the $1.46 per share final dividend investors received in March as well as the interim dividend of 41 cents that was paid out last September.

Both of these payments were fully franked, which means that the trailing yield of 5.94% grosses up to an even more impressive 8.49% with the value of that franking.

But that represents the past. So what of the future?

Are Woodside shares' dividend yield of 6% a floor or a ceiling?

Well, any company's trailing dividend yield comes from its past dividend payments. So no investor should automatically assume Woodside shares will continue to pay a near-6% yield.

Saying that, many ASX experts are indeed predicting Woodside will be able to keep doling out large dividend payments going forward.

One is broker Ord Minnet. As my Fool colleague Tristan covered last month, this broker reckons Woodside's next interim divided will bring its dividend yield up to 13.6% for FY2022. However, Ord Minnet is also predicting the dividends Woodside will pay that cover FY2023 will be lower, and will equate to a forward yield of 8.1%.

Even so, if Ord Minnet is to be believed, it looks as though Woodside's trailing dividend yield of almost 6% might be a floor, rather than a ceiling, over the next 12 months. But we shall have to wait and see what happens.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Energy Shares

Happy man standing in front of an oil rig.
Energy Shares

What does Macquarie think Karoon Energy shares are worth?

This broker has updated its guidance on this energy company

Read more »

Oil industry worker climbing up metal construction and smiling.
Energy Shares

ASX 200 energy shares lead the market as US trade deals fuel optimism

ASX energy shares lifted 3.94% as more US trade deals led to improved market sentiment.

Read more »

Woman with an amazed expression has her hands and arms out with a laptop in front of her.
Energy Shares

$10,000 invested in Paladin Energy shares 5 years ago is now worth…

July 2020 would have been a great time to buy Paladin Energy shares.

Read more »

Oil worker using a smartphone in front of an oil rig.
Energy Shares

Does Macquarie rate Woodside Energy shares a buy, hold or sell?

Let's see what the broker is saying about the energy giant.

Read more »

Coal miner standing in a coal mine.
Energy Shares

Up 62% since April, what's happening with Whitehaven shares today?

Whitehaven shares have enjoyed a strong rally since April despite weak coal prices.

Read more »

A young man punches the air in delight as he reacts to great news on his mobile phone.
Energy Shares

Why Macquarie sees Paladin Energy shares as a buy in the dip opportunity

This uranium stock could be a buy according to the broker.

Read more »

Happy man working on his laptop.
Energy Shares

Opportunity knocks: 2 ASX stocks ready to surge

Analysts expect big things from these shares.

Read more »

Two businesspeople walk in opposite directions on a staircase with arrows under their arms, one pointing up and one pointing down.
Energy Shares

3 largest ASX uranium shares move in different directions amid fresh developments

Here's what is happening with Paladin Energy, Deep Yellow, and Boss Energy shares on Thursday.

Read more »