The board of Woolworths Group Limited (ASX:WOW) has announced that it will pay a dividend on the 26th of September, with investors receiving A$0.45 per share. The dividend yield will be in the average range for the industry at 2.9%.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Woolworths Group's Projected Earnings Seem Likely To Cover Future Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, the company was paying out 106% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 51%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

Over the next year, EPS is forecast to expand by 96.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 53%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.ASX:WOW Historic Dividend August 29th 2025

Check out our latest analysis for Woolworths Group

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was A$1.37, compared to the most recent full-year payment of A$0.84. This works out to be a decline of approximately 4.8% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings have grown at around 2.1% a year for the past five years, which isn't massive but still better than seeing them shrink. So the company has struggled to grow its EPS yet it's still paying out 106% of its earnings. As they say in finance, 'past performance is not indicative of future performance', but we are not confident a company with limited earnings growth and a high payout ratio will be a star dividend-payer over the next decade.

In Summary

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Woolworths Group is a great stock to add to your portfolio if income is your focus.

Story Continues

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 3 warning signs for Woolworths Group that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

View Comments