Coles Group Ltd (ASX: COL) shares and Woodside Energy Group Ltd (ASX: WDS) shares are both intriguing investments right now.
They are among the ASX's largest blue-chip shares and two of the most significant businesses in their respective industries in this region.
If I were considering investing in these companies, I'd want to weigh up a few different factors.
So, let's look at those areas.
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Dividend yield
Large Australian companies are known for being generous with their dividends, and these two S&P/ASX 200 Index (ASX: XJO) shares are no exception.
We'll look at the projected payouts for FY25 because I think the future payments are more important than recent history.
According to the projections on Commsec, Coles is forecast to pay a grossed-up dividend yield of 5.3% in FY25, while Woodside could pay an 8.1% yield.
Price/earnings ratio
Knowing the earnings multiple can help us compare the two businesses, even though they're in different industries. Having said that, a lower price/earnings (P/E) ratio doesn't necessarily mean one company is a better value than the other.
According to the forecasts on Commsec, the Woodside share price is valued at 14x FY25's estimated earnings and the Coles share price is valued at 22x FY25's estimated earnings.
It's typical for businesses in volatile and cyclical industries like energy to trade on a lower earnings multiple, while a defensive ASX share usually trades on a higher multiple. In my eyes, the difference in the earnings multiple explains a significant portion of the dividend yield shortfall.
Attractiveness of valuation
It's important to note that the FY25 earnings projections are just a snapshot of one year. The direction of profit in future years is important, too.
According to Commsec, Coles' profit is expected to grow by another 13.3% in FY26, while Woodside's profit is forecast to decline by 12%. Of course, those are projections only, and energy prices could change significantly in the next year or two.
I like that Woodside is investing in several projects, including Sangomar, Scarborough, Driftwood LNG, and Trion, which can unlock cash flow streams. With the Woodside share price down more than 30% in the past 12 months, I think the business could be a contrarian opportunity and maybe the better buy. However, it could be a higher risk, and I wouldn't make it an ultra-long-term holding. Now may be a good time to invest during the cycle of energy markets.
Coles is a more straightforward investment. Its goal is to sell more items to more people. A rising population, food inflation, and the addition of more supermarkets are all helpful for sales and profit. It just needs to win customers ahead of Woolworths Group Ltd (ASX: WOW), Aldi, and IGA.
If I were a retiree or beginner investor, I'd choose Coles shares for the stability and steady growth of profit and dividends.
However, if I were a fund manager trying to outperform the market, I'd choose Woodside shares for the potential turnaround opportunity in the next two or three years, and the short-term elevated passive income.
