Woodside Energy Group Ltd (ASX: WDS) shares are a popular option for income investors.
The energy giant regularly shares a good portion of its profits with its shareholders in the form of dividends.
For example, during the first half of FY 2024, the company rewarded them with a fully franked interim dividend of 69 US cents per share (A$1.04 per share).
The total amount of the interim dividend payment is US$1,310 million, which represents approximately 80% of Woodside's underlying net profit after tax for the half.
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What's next for the Woodside dividend?
According to a note out of Morgans, its analysts are expecting a full year dividend of approximately A$1.84 per share in FY 2024.
This means that a dividend of approximately 80 Australian cents per share is expected in the second half.
Based on the current Woodside share price of $24.34, this final dividend equates to an attractive fully franked 3.3% dividend yield.
After which, Morgans is expecting a dividend cut in FY 2025. The broker is forecasting Woodside to pay a fully franked dividend of approximately A$1.53 per share in FY 2025. However, if this estimate proves accurate, it will still mean a generous 6.3% dividend yield for investors.
That's significantly better than the market average yield, which usually sits at around 4%. And with interest rates tipped to fall next year, this big yield arguably looks even more attractive.
But should you buy shares? Let's find out what the team at Morgans is saying.
Are Woodside shares a buy?
According to the note, in response to the company's third quarter update, the broker has reaffirmed its add rating and $33.00 price target on its shares.
This implies potential upside of almost 36% for investors over the next 12 months. And including dividends, this suggests that a total 12-month return of 42% is possible if buying at current levels.
Morgans believes that Woodside's shares are undervalued at current levels. It explains:
The tide is certainly out in terms of investor sentiment on WDS. Despite Brent oil trading in line with our long-term forecast, WDS' share price implies a near cycle-low oil price level. We do not see this as capable of being explained by WDS' growth profile (comfortably funded) or risks around non-core assets such as Browse. While the share price performance has been disappointing, supported by a strong balance sheet and high margins, we see WDS investors as capable of being patient. Investment view: We maintain an ADD recommendation believing WDS offers attractive long-term value.
