Woolworths Limited (ASX: WOW) shares, Wesfarmers Ltd (ASX: WES) shares and Coca-Cola Amatil Ltd (ASX: CCL) shares offer consistent dividends, but is that enough to justify a buy rating?
Woolworths – dividend yield: 3% fully franked
Woolworths has been through a tough few years, with its share price tumbling from over $37 in 2014 to a low of less than $21 last year. However, the leading supermarket operator and owner of Big W and Dan Murphy's appears to have taken strides to right the ship. This has included the divestment of Masters and Home Timber and Hardware, as well as managerial changes.
During this time, the company elected to slash its dividend to reinvest in the business and return to providing the best service to supermarket shoppers. In the eyes of analysts, it appears to be welcome news.
Wesfarmers – dividend yield: 4.6% fully franked
While Woolworths shares were stumbling, the owner of Coles, Kmart, Target and Bunnings Warehouse was capturing new customers and posting bigger profits. In addition to these leading retail names, Wesfarmers also owns an Industrials business, which includes coal mines, and Officeworks. The company is planning to divest both of these businesses.
At current levels, the market appears to value Wesfarmers very richly, in my opinion. While the company undoubtedly has very capable management and strong franchises, investors should always look to purchase shares in a company when they trade at a price below their intrinsic value.
Coca-Cola Amatil: dividend yield: 4.4% partially franked
Coca-Cola Amatil is Australia's and five neighbouring countries' bottler and distributor of Coca-Cola products under an exclusive licence with the Coca-Cola Company, which is also its major shareholder. The company also distributes Beam alcohol beverages and a range of other products, including SPC.
The company has exclusive rights to the Indonesian market, which has long been a key growth market. However, to date, it has had little success pursuing the Asian market. Nonetheless, having the rights to a world-renowned beverage brand affords the company some good defensive qualities, including the ability to pay a consistent dividend.
Buy, hold or sell
In my opinion, these businesses would fit nicely into a conservative investor's share portfolio. However, it is important to consider valuation and buy a company's shares at a price that both minimises downside risks and provides plenty of upside.
At today's prices, I think Woolworths is the best value of the three companies — but even its valuation is not compelling. I think all three of the businesses are a hold today.
