Wesfarmers Ltd (ASX: WES) shares are on my watchlist. Here's why they might be worth putting on yours.
Retail Heavyweight
As the owner of Coles, Kmart, Target, Bunnings Warehouse, Officeworks and much more, it would be fair to say that Wesfarmers is the retailer of Australia. While retail is a fickle business, with slim profit margins subject to the whims of consumer confidence and trends, Wesfarmers is a diverse retailer. Its diverse business model has helped it weather competition and grow in complementary areas.
Coles, for example, has taken the fight to Woolworths Limited (ASX: WOW), while Bunnings Warehouse pushed Masters out of the market.
However, Wesfarmers is not immune to competition, as evidenced by Target. With the company's rich valuation and the arrival of Amazon, I'm not comfortable adding Wesfarmers shares to my portfolio at today's prices. Hence, it is on my watchlist.
Dividends
Another reason I would consider buying Wesfarmers shares, for the right price, is its dividends. The company has a sturdy balance sheet. So although parts of its business are cyclical, I believe any pause in dividends would be temporary.
UK expansion
Bunnings Warehouse is rolling out in the UK and Irish markets, an opportunity larger than it has domestically, where it is already the most dominant company in home improvement. So far, the expansion appears to be going okay. However, I think it is too early to place too much emphasis on this expansion.
Foolish Takeaway
There is a lot to like about Wesfarmers, which has developed a reputation for excellence over its 100 plus years. However, its shares are priced to perfection in my opinion. Therefore, it will remain on my watchlist for now.
