Is the Woodside share price a buy for its 14% dividend yield?

The Woodside Energy Group Ltd (ASX: WDS) share price has seen plenty of volatility over the last few months, as the chart below shows. The recently-reduced valuation means the ASX energy share‘s dividend yield has received a big boost.

Woodside generates earnings from projects around the world in the Asia-Pacific, Africa, and North America regions. The recent events in the Middle East led to higher energy prices and lower supply. This period could help the business deliver strong profits and a great dividend.

The business is forecast to pay large payouts over the next couple of financial years.

Dividend projection

Woodside has been a solid dividend option over the years – oil and gas remain an important part of the global economy, so the company plays a significant role in everyday life.

Its projected net profit in the 2026 and 2027 financial year could allow the business to pay very pleasing passive income in the next couple of years.

The projection on Commsec suggests the business could pay an annual dividend per share of A$2.39 in FY26 and A$2.98 per share in FY27.

At the current Woodside share price, it could pay a grossed-up dividend yield of 11.8% in FY26 and 14.6% in FY27, including franking credits.

There are very few S&P/ASX 200 Index (ASX: XJO) shares that offer a double-digit dividend yield, while Woodside’s is expected to be well above 10%, according to analysts.

The average return of the ASX share market over the last 10 years has been 9%, so Woodside’s annual passive income over the next couple of financial years could outperform the entire ASX share market’s return.

Of course, dividends are not guaranteed – the projected amounts are just estimates. For me, an even more important question is whether the Woodside share price is a good buy.

Is the Woodside share price a buy?

Analysts are somewhat mixed on the business at the moment. There have been nine ratings on the business in the last three months. Of those ratings, two were a buy, six were a hold and one was a sell.

Of those recent ratings, the average price target was $31.02. That implies a possible rise of 6% from where it is at the time of writing. If that happened, combined with the dividend return, Woodside shares could deliver a strong return. It may depend on what happens in the Middle East and the supply of energy to the world.

The most optimistic price target is $36.50, while the most pessimistic price target is $24.75. It’ll be interesting to see what happens next.

Either way, there are plenty of ASX shares that are not exposed to changing energy prices like Woodside is, so some investors may prefer other opportunities.

The post Is the Woodside share price a buy for its 14% dividend yield? appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Monday
• ASX 200 energy shares rebound after US-Iran peace deal falls apart
• How much do I need in my superannuation to get $50k per year in passive income?
• 5 things to watch on the ASX 200 on Friday
• 7 ASX shares catching broker upgrades this week

Motley Fool contributor Tristan Harrison 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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.