Woolworths Group Ltd (ASX: WOW) is experiencing a notable decline in its share price, currently standing at $31.04. This figure represents an 11.6% drop compared to five years ago when shares were priced at $34.90. The stock peaked above $40 in mid-2021, indicating a significant decline of around 25% since that high point. This downturn has raised concerns among investors regarding the company’s performance over the past five years.
The challenges faced by Woolworths are multifaceted. According to analysts, the company has endured one of its most challenging periods, impacted by both internal and external factors. Investor apprehensions have heightened, particularly regarding the underwhelming performance of its Big W and New Zealand divisions. Additionally, Woolworths has lost some of its market share to its key competitor, Coles Group Ltd (ASX: COL).
Leadership transitions have also contributed to this instability. The change from former CEO Bradford Banducci to current CEO Amanda Bardwell has not gone smoothly. Compounding these issues, Woolworths’ recent earnings report highlighted further obstacles.
In August, the company released its full-year report for FY2025, which, while presenting some positive aspects, revealed significant areas of concern. Revenue increased by 3.6% year-over-year, reaching $69.1 billion. However, the company faced rising costs, leading to a 12.6% drop in earnings before interest and tax, which fell to $2.75 billion. Ultimately, net profit after tax decreased by 17.1% to $1.39 billion.
As a result, Woolworths decided to reduce its final dividend for FY2025 by 21.1%, bringing it down to 45 cents per share, fully franked. In total, shareholders received 84 cents per share for the year, reflecting a 19.2% reduction from the $1.04 distributed in FY2024.
Looking ahead, analysts have provided mixed predictions regarding Woolworths’ dividend outlook. Last month, projections indicated a potential recovery in the company’s dividends. The consensus estimates suggest a fully franked dividend of 99.5 cents per share for 2026, a significant rebound from the previous year’s cut. Following that, analysts anticipate dividends of $1.13 in 2027 and $1.35 in 2028. If these forecasts materialize, it would represent substantial year-on-year increases of 18.45%, 13.57%, and 19.46%, respectively.
Should Woolworths meet these projected payouts, the forward dividend yields would stand at 3.21%, 3.64%, and 4.35% based on current pricing, compared to the company’s trailing dividend yield of 2.7%. Nevertheless, investors remain cautious, weighing the viability of these optimistic forecasts against the backdrop of recent performance.
For those considering investing in Woolworths, it is essential to thoroughly evaluate these developments. Notably, investing expert Scott Phillips has pointed out that Woolworths may not be among the top stock picks at this time, suggesting that potential investors should explore other opportunities as well.
As the company navigates these turbulent waters, stakeholders will be watching closely to see if Woolworths can regain its footing in the competitive grocery market and restore investor confidence in the coming years.
