Why is the Woolworths (ASX:WOW) share price up 5% in a week?

The S&P/ASX 200 Index (ASX: XJO) has certainly had an interesting week. Over the past five trading days, the ASX 200 is up 0.6%. But that 0.6% hides a ‘2-speed market’.

In one lane, we have seen some ASX tech shares like Afterpay Ltd (ASX: APT) sold off. In the other, we have seen strength from the ASX banks and most of the ASX 200’s blue chip shares. One of those points of strength has been the Woolworths Group Ltd (ASX: WOW) share price.

Yes, Woolworths shares are up roughly 5% over the past five trading days. That’s a pretty strong move for an ASX giant like Woolies. To put this in perspective, Woolworths shares have risen 7.54% on today’s prices since 30 May 2014.

So why the sudden rush to buy this grocery giant?

3 reasons why the Woolworths share price might be moving higher

Dividends, baby

Firstly, we did get a market update on Tuesday that might have gotten investors a little hot under the collar. That was a dividend notice for Woolies’ interim dividend of 53 cents per share that will be paid out on 14 April (which will incidentally be the 109th anniversary of the Titanic’s unsuccessful marriage with an iceberg, not that that is relevant).

But investors would have already known that was coming, seeing as Woolies announced it as part of its earnings report last month.

Woolworths is about to get a divorce of sorts

Secondly, perhaps investors are getting excited for Woolworths’ upcoming demerger of its Endeavour Group. The company also informed investors last month that the divorce is scheduled for June 2021 after being delayed by the events of last year. Endeavour Group houses Woolworths’ bottle shop chains (Dan Murphy’s and BWS). As well as a collection of pubs the company owns.

If all goes well, Woolworths shareholders will most likely receive shares of the new company come June. Demergers tend to generate value for shareholders. We saw this displayed in dramatic form when Wesfarmers Ltd (ASX: COL) offloaded Coles Group Ltd (ASX: COL) back in 2018. Both companies have gone on to rise substantially in value from that point.

Perhaps investors are hoping for a repeat performance from Woolworths, and are piling in this week as the date nears.

The old ‘rotation’

Finally, as we have touched on earlier, this could just be the result of investors seeking out safety. The last month or two has seen the market abandon what some might call ‘risky’ shares like Afterpay for shares that could be considered ‘safe harbours’ like Commonwealth Bank of Australia (ASX: CBA), Telstra Corporation Ltd (ASX: TLS) and Woolies. Coles has also had a decent week too.

Often, the large fund managers that are responsible for most of the ASX’s short-term fluctuations tend to move in packs. Some commentators call this a ‘rotation’. It’s possible that all we are seeing in the Woolworths share price over the past week or so can just be put down to that.

More reading

• Afterpay (ASX:APT) share price hits 3-month low: Time to buy?
• 2 ASX 200 shares that keep growing their dividends
• Some of the ASX 200 companies that drove Australian exports to record levels
• Here’s why the Oceania Healthcare (ASX:OCA) share price is falling today
• What is pushing up the Atlas Arteria (ASX:ALX) share price today?

Motley Fool contributor Sebastian Bowen owns shares of Telstra Limited. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO, COLESGROUP DEF SET, Wesfarmers Limited, and Woolworths Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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