Woodside Petroleum Ltd (ASX: WPL) shares currently offer a fully-franked, 5.41% dividend yield. Are the shares a buy for dividend income?

About Woodside

Woodside Petroleum is Australia’s largest independent oil and gas company with a global portfolio. It is an explorer, developer, producer and supplier of energy. The company has been operating for over 60 years and is now Australia’s leading LNG producer. Some of its current development projects are in Senegal (SNE), Myanmar, Canada (Kitimat) and Timor-Leste / Australia (Sunrise).

How Does Woodside Compare?

Woodside shares trade on a relatively conservative price-earnings (PE) ratio of 17.6 (click here to learn what a PE ratio is). This is broadly in line with competitor Santos Limited (ASX: STO) but far below the PE ratios of companies like Oil Search Limited (ASX: OSH) and WorleyParsons Limited (ASX: WOR).

Of these competitors, Oil Search offers the best dividend yield at 2.09%, far below the 5.41% offered by Woodside Petroleum shares.

Woodside is a well-established company with a conservative debt profile and a share price of approximately 1.39 times its net tangible assets, compared to 1.58 times for Santos shares and 1.48 times for Oil Search shares.

Compared to the competitors, Woodside shares seem conservatively priced and offer the best dividend yield.

Why I Wouldn’t Buy

Despite the positive comparisons, I’m not looking at Woodside shares for dividend income.

When investing for dividends, the goal is to find a company with a competitive advantage that pays stable dividends and can gradually increase the dividend each year. Woodside is a price-taker and is very cyclical over the long-term.

While there may be growth opportunities at the right price, it doesn’t really fit the description of a decent dividend investment. You only have to look back a couple of years in the dividend history to see how much they fluctuate, from 151 cents in 2015 to nothing in 2016 then 123 cents in 2017.

I’d be more comfortable investing in one of the dividend shares mentioned in the free report below.


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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).

Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.