Woolworths Group Ltd (ASX: WOW) is the kind of ASX 200 share that I think deserves a spot in most portfolios.
This is a business built around everyday spending. Millions of Australians shop at Woolworths each week, and that gives the company a strong position in a category that remains essential through different economic conditions.
At a current share price of $34.40, I think Woolworths shares could be worth buying for three key reasons.
Defensive demand
The first reason I like Woolworths is its defensive nature.
Food and household essentials are not optional purchases in the same way as holidays, furniture, electronics, or luxury goods. Households may change what they buy when money is tight, but they will always need groceries.
That gives Woolworths a level of earnings resilience that many companies cannot match.
This does not mean the business is immune from pressure. Shoppers are value-conscious, competition remains strong, and supermarkets need to keep investing in prices, stores, supply chains, loyalty, and online capability.
But I think Woolworths is well placed to deal with those challenges.
A solid growth outlook
The second reason is that Woolworths is not just a defensive income share. There is still robust earnings growth expected over the medium term.
According to CommSec, the consensus estimate is for Woolworths to generate earnings per share of $1.30 in FY26, $1.48 in FY27, and $1.64 in FY28.
That implies earnings growth of close to 14% in FY27 and around 11% in FY28.
I think that is a solid outlook for a supermarket business.
Looking further down the line, the company has several ways to improve. It can keep building its online grocery business, use loyalty and data more effectively, improve store productivity, expand private label, and invest in supply chain efficiency.
None of those things will make headlines. But in a business as large as Woolworths, small improvements can still add up.
Dividends can keep rising
The third reason is income.
CommSec’s consensus estimates suggest Woolworths could pay dividends per share of 99.5 cents in FY26, $1.13 in FY27, and $1.28 in FY28.
Based on the current share price of $34.40, that would represent forward dividend yields of approximately 2.9%, 3.3%, and 3.7%, respectively.
Those are not the biggest yields on the ASX, but combined with potential capital gains, I think the overall investment outlook is compelling.
However, the valuation is worth acknowledging. Based on consensus estimates, Woolworths is trading on around 26 times FY26 earnings, 23 times FY27 earnings, and 21 times FY28 earnings.
That is not cheap. But I think Woolworths deserves to trade on a premium to many ASX shares because of its defensive qualities, market position, and expected earnings recovery.
Foolish takeaway
Woolworths shares at around $34 are not a bargain-bin opportunity.
But not every good investment starts with an obviously cheap valuation. Sometimes the appeal is owning a high-quality business with reliable demand, a strong market position, and a path to better earnings over time.
That is how I see Woolworths today. The company offers defensive exposure, forecast earnings growth, and a dividend stream that could become more attractive over the next few years. For patient investors, I think that makes the shares worth buying.
The post 3 reasons to buy Woolworths shares at $34 appeared first on The Motley Fool Australia.
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Motley Fool contributor Grace Alvino has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Woolworths Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.