Why today is a good day to own Wesfarmers shares

Shareholders of the Bunnings and Kmart owner will be smiling today.

| More on:
a smiling woman sits at her computer at home with a coffee alongside her, as if pleased with her investments.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It certainly is a good time to have Wesfarmers Ltd (ASX: WES) shares in your portfolio.

The conglomerate's shares are up an impressive 36% over the last 12 months.

This means that if you had invested $20,000 into the Bunnings owner's shares a year ago, your investment would be worth over $27,000 today.

But it gets better. Today is payday for eligible Wesfarmers shareholders, with its latest dividend being dished out on Wednesday.

It's a good day to own Wesfarmers shares

Last month, Wesfarmers released its half-year results and impressed the market with a stronger than expected performance.

For the six months, the company reported a 0.5% increase in revenue to $22,673 million. This was driven largely by a 1.7% increase in Bunnings revenue and a 7.8% jump in Kmart Group revenue.

Things were better for its net profit after tax, which grew at a quicker rate of 3% to $1,425 million. This was the result of a very strong performance by the Kmart Group business, which posted a 26.5% increase in earnings for the six months. Management highlights that this reflects the positive customer response to Kmart's lowest price positioning.

In light of this positive form, the Wesfarmers board elected to increase its fully franked interim dividend by 3.4% to 91 cents per share.

It is this dividend that is being paid out to eligible shareholders today.

Going back to our original example. If you'd bought $20,000 worth of Wesfarmers shares a year ago, you would own 400 units today.

This means that you would be receiving a very welcome pay check of $364 today.

Where next for its shares?

Unfortunately, all the major brokers believe that Wesfarmers shares have now pushed beyond fair value and are in overvalued territory.

The most bullish out there is Morgans with its hold rating and $62.30 price target. This implies potential downside of 7% from current levels.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Wesfarmers. The Motley Fool Australia has positions in and has recommended Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Dividend Investing

Cheerful boyfriend showing mobile phone to girlfriend in dining room. They are spending leisure time together at home and planning their financial future.
Dividend Investing

Buy these high-yield ASX 200 dividend stocks in 2025

Which dividend stocks are getting the thumbs up from analysts right now? Let's find out.

Read more »

Smiling woman with her head and arm on a desk holding $100 notes out, symbolising dividends.
Dividend Investing

Analysts name 3 ASX dividend shares to buy in January

These shares have been tipped as buys for income investors.

Read more »

Beautiful young couple enjoying in shopping, symbolising passive income.
Dividend Investing

Invest $30,000 in 2 ASX shares, create almost $3,000 in passive income

I think both these ASX dividend shares will continue to deliver attractive passive income in 2025.

Read more »

Dividend Investing

Buy these ASX 200 dividend shares for 5% to 8% yields

Analysts are tipping these shares to provide income investors with great yields.

Read more »

A man has a surprised and relieved expression on his face. as he raises his hands up to his face in response to the high fluctuations in the Galileo share price today
Dividend Investing

Broker says these ASX dividend stocks could generate massive returns

Bell Potter is tipping these shares to generate big returns for investors.

Read more »

Dividend Investing

I think these 2 ASX dividend shares are buys for income in January

Looking for big dividend yields? These stocks could bring it.

Read more »

A man holding a cup of coffee puts his thumb up and smiles while at laptop.
Dividend Investing

Broker says these ASX 200 dividend stocks are best buys

The broker has its eyes on a mining giant and a toll road operator.

Read more »

Happy couple enjoying ice cream in retirement.
Dividend Investing

2 ASX dividend stocks I'd buy for big income

These stocks offer a significant dividend potential.

Read more »