The Wesfarmers Ltd (ASX: WES) share price rose 7% today after the market had a look at the retail conglomerate's half-year result.
The main piece of news that might have been a surprise to most people was that the operator of Bunnings, Kmart, Target and Officeworks declared a special dividend of $1 per share. That special dividend alone is worth 4% grossed-up at today's closing share price.
Wesfarmers also declared a $1 per share regular dividend, equating to another 4% grossed-up. That's not bad – 8% returns are being given to shareholders in this report.
In terms of profit, Wesfarmers' continuing operations generated a 10.4% increase of profit to $1.08 billion. We already knew the Kmart & Target division didn't do so well, its earnings before interest and tax (EBIT) declined by 3.8%. But Bunnings delivered yet again with EBIT growth of 7.9% to $932 million and Officeworks grew EBIT by 11.8% to $76 million.
I was relieved and impressed that Bunnings and Officeworks grew profit, as they were two large businesses that could have seen earnings decline due to falling housing prices.
Wesfarmers reported a total net profit after tax of just over $4.5 billion, which included post-tax significant items of $3.06 billion relating to gains on the demeger of Coles Group Limited (ASX: COL) and the disposals of Bengalla, Kmart Tyre and Auto Service and Quadrant Energy which were completed during the half-year.
Wesfarmers said it has a very strong balance sheet with net debt at the end of December 2018. The company decided to pay the special dividend taking into account the asset disposals, the franking credits, the balance sheet and cash flow generation whilst holding enough to make acquisitions when opportunities arise.
Foolish takeaway
This was a shareholder-friendly report which delivered solid total profit growth and pleasing dividends. Management warned that the retail environment remains tough, so It wouldn't be jumping to buy Wesfarmers shares, particularly after today's rise. But, I think it does speak to how well Wesfarmers manages shareholder returns and long-term growth.
