Woolworths Group vs Telstra Group: Which ASX blue chip pays better passive income?

Woolworths Group vs Telstra Group shares: Which blue chip is better for passive income?

Looking for steady passive income from your investments? It’s hard to overlook two of Australia’s biggest blue-chip icons: Woolworths Group Ltd (ASX: WOW) and Telstra Group Ltd (ASX: TLS). Both are household names and staples in many portfolios — but which one deserves your cash if dividends and reliable returns are your top priority? Here’s how Woolworths shares stack up against Telstra shares for income-focused investors.

The case for Woolworths Group

Woolworths is a retail giant, dominating the Australian supermarket sector and also owning Big W in Australia plus several New Zealand grocery chains. With its vast network of stores and a brand reputation for reliability, Woolworths has been the go-to for grocery essentials for decades. According to its most recent public description, the company operates over 1,400 stores and employs a huge workforce across Australia and New Zealand.

From a dividend perspective, Woolworths has long been regarded as a defensive play: groceries and essentials tend to be in demand regardless of how the economy is faring, which can mean stable revenues and regular profits.

Top fundamentals include:

• Dividend yield of 2.53% (fully franked at 100%)
• P/E ratio of 41.38, which is on the high side compared to many other blue chips
• Year to date return of 33.6%, showing strong recent share price momentum

Woolworths has a long history of fully franked dividend payments, and its latest dividend was $0.52 per share, paid in September 2026.

The case for Telstra Group

Telstra is Australia’s largest and best-known telecommunications provider, spanning mobile, internet, and enterprise solutions. With a widespread network and a historic reputation for dividend consistency, Telstra is often viewed as a classic income stock. The company has been revamping its operations in recent years, with several subsidiaries under the Telstra Group banner after a 2022 restructure.

For those chasing passive income, Telstra ticks a few appealing boxes:

• Dividend yield of 4.37% (franked at approximately 90%) — comfortably beating Woolworths on headline yield
• P/E ratio of 24.17 — much lower than Woolworths, suggesting a more moderate valuation relative to recent earnings
• Year to date return of 3.1% — more subdued share price growth than Woolworths this year

Recent dividends have been $0.105 per share (final, September 2026) and $0.105 per share (interim, March 2026), mostly fully franked.

Valuation comparison

Here’s how Woolworths and Telstra stack up on the key valuation and dividend figures that matter most to income-oriented investors:

Note: Woolworths’ higher P/E ratio means investors are paying more for each dollar of reported earnings than with Telstra. Woolworths currently has full franking, which can be very valuable for those on lower tax rates or SMSF investors, whereas Telstra’s recent dividends have been about 90% franked.

Recent share price momentum

Looking at the most recent shared closing date of 6 October 2026:

• Woolworths closed at $38.12, down 0.42% on the day, but remains up a very strong 33.6% year to date.
• Telstra closed at $4.81, flat on the day, delivering a year to date return of 3.1%.

Which is the better buy?

For passive income seekers, Telstra Group stands out thanks to its much higher headline dividend yield (4.37% vs Woolworths’ 2.53%), plus a still-solid degree of franking on recent payments. While Woolworths easily takes the lead on recent share price gains, its yield is materially lower and its P/E ratio is far higher, suggesting it may be priced for stronger growth than is typically delivered by supermarket stocks.

That said, Woolworths’ defensive qualities and fully franked dividends remain attractive, especially for those wanting reliability in tougher economic climates. But if my main priority is income — particularly in the form of regular, meaningful cash flow — I’d lean toward Telstra Group right now. The yield is simply more generous, and it trades on a lower earnings multiple, which helps reassure me that I’m not overpaying for those dividends.

The post Woolworths Group vs Telstra Group: Which ASX blue chip pays better passive income? appeared first on The Motley Fool Australia.

More reading

• Here’s the dividend forecast out to 2029 for Woolworths shares
• My favourite ASX passive income shares for retirees
• How much passive income can I earn from a $950,000 superannuation balance?
• 3 defensive ASX shares I’d buy in a market sell-off
• How much must I invest in Telstra shares to earn a $1,000 passive income in 2027?

Motley Fool contributor Laura Stewart 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 Telstra Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips. This article was prepared with the assistance of Large Language Model (LLM) tools for the initial draft. Any content assisted by AI is subject to our robust human-in-the-loop quality control framework, involving thorough review, substantial editing, and fact-checking by our experienced writers and editors holding appropriate credentials. The Motley Fool Australia stands behind the work of our editorial team and takes ultimate responsibility for the content published by The Motley Fool Australia.