Smart investors are betting on this ASX passive income stock

ASX investors looking for passive income in 2026 have plenty of choices to sift through.

There’s always the ASX 200 bank stocks, of course. The ASX banks have always been a go-to choice for investors seeking fat, and usually fully-franked dividends. However, dividend yields from the four largest banks are currently rather low compared to what investors have historically enjoyed.

Investors can always opt for commodity-based dividend payers instead; that being your miners and drillers. Sure, many of these stocks, including BHP Group Ltd (ASX: BHP) and Woodside Energy Group Ltd (ASX: WDS), do have the potential to pay sizeable dividends, but they are not the most reliable passive income stocks. That’s due to their reliance on volatile commodity prices to pay large dividends.

Other, more reliable blue-chip dividend stocks are still around, of course. However, the likes of Telstra Group Ltd (ASX: TLS) and Wesfarmers Ltd (ASX: WES) are also trading with relatively low dividend yields compared to what investors have become accustomed to seeing over the past decade or two.

That’s why investors may want to think outside the box if they wish to secure some outsized dividend income in 2026.

One possible ‘outside the box’ stock to consider is Woolworths Group Ltd (ASX: WOW).

Analysts pick this passive income stock as a buy today

Woolworths has just come off one of its worst two-year periods in 2024 and 2025. A number of less-than-favourable developments comprehensively took the shine off this company, leading to investors sending it down almost 20% in 2024 and by another 4% or so last year.

Those developments included the ongoing erosion of market share to the benefit of its rival, Coles Group Ltd (ASX: COL), and the controversial departure of former CEO Bradford Banducci.

But smart investors are sensing an opportunity here. At just over $30 today, Woolworths shares are currently at a price the company first hit way back in 2014. ASX broker Bell Potter reckons it’s a good price to buy. As my Fool colleague covered last week, Bell Potter has given Woolworths stock a buy rating and a 12-month share price target of $10.70. The broker noted that  Woolworths “has been in an earnings downgrade cycle for two years and this looks to be coming to an end”.

Analysts pointed to the 12% discount Woolworths shares are trading at compared to Coles, as well as the 14% discount the company is sitting at compared to its own historical valuation, as the roots of their confidence.

As we also covered just yesterday, analysts are forecasting that Woolworths will be able to fund 99.5 cents per share in dividends over FY2026. At the current Woolworths share price, this would give the company a forward dividend yield of about 3.3%. That would certainly be a good start for passive income seekers in 2026 if accurate.

The post Smart investors are betting on this ASX passive income stock appeared first on The Motley Fool Australia.

More reading

• 3 defensive ASX dividend shares to buy with $10,000
• How to build a $250,000 ASX share portfolio starting at zero
• Top Australian stocks to buy with $5,000 in 2026
• 2 strong ASX 200 blue chip shares to buy with $7,000
• Why I think this ASX small-cap stock is a bargain at $2.55

Motley Fool contributor Sebastian Bowen has positions in Wesfarmers. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Wesfarmers. The Motley Fool Australia has positions in and has recommended Telstra Group and Woolworths Group. The Motley Fool Australia has recommended BHP Group and Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.