Why I'd buy Wesfarmers shares for my child in a heartbeat

The owner of Bunnings looks like a great pick for my child.

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Wesfarmers Ltd (ASX: WES) shares would be one of the first share market investments I'd make for my child if I had some spare cash.

I like the idea of making small investments for my child and watching that little seed grow into a sizeable amount in about 15 years.

Wesfarmers is the parent company of numerous Australian businesses including Bunnings, Kmart, Officeworks, Target, Priceline and WesCEF (chemicals, energy and fertiliser).

A Wesfarmers investment could satisfy several elements of what I'm looking for. Let's dive in.

Teaching about investing

I'd guess most Aussies, including kids, know about Bunnings, Kmart and Officeworks. I'd describe them as the leaders of their respective retail categories, including hardware and DIY, discount department stores and office and school products. We can buy a tiny piece of those businesses and be entitled to a small part of their profit.

Ideally, I'd like my child to have a good understanding of how businesses and the overall share market work. Wesfarmers shares could be a good starting point.

Investing can be a great tool for making our money work harder for us over time. I love saving in a bank account and earning interest, but businesses can grow profits and pay dividends, which is more exciting to me.

I think an ASX share that can provide a tangible connection to shops we see in real life can be an interesting investment for a child.

Good dividend track record

Wesfarmers has a solid track record of paying dividends to shareholders over the last few decades.

I think one of the simplest lessons from investing in quality ASX blue-chip shares is that ownership can lead to pleasing dividend payouts.

It's rewarding to get a dividend payment every six months without having to do any work for it.

Helping my child see that owning pieces of businesses, such as Wesfarmers shares, can lead to helpful dividend cash flow every year could be a compelling lesson in my eyes.

Wesfarmers pays its dividend every year from the solid profits generated by Bunnings, Kmart and the other businesses.

Broker UBS is forecasting the company's dividend per share could grow from $1.99 per share in FY24 (a 3.9% grossed-up dividend yield) to $2.88 per share in FY28 (a 5.6% dividend yield).

Long-term compounder

The Wesfarmers business model shows it's possible to own a diverse array of businesses and deliver good financial compounding over the long term. The company generates impressive returns on invested money within the business. Money spent within Bunnings and Kmart has really paid off over the years.

Over the past 10 years, Wesfarmers shares have delivered total shareholder returns (capital growth plus dividends) of an average of 14.3%. That compares to an average return per annum of 7.3% for the iShares Core S&P/ASX 200 ETF (ASX: IOZ).

Though it's never guaranteed, I think Wesfarmers shares have shown they're capable of beating the ASX share market over the long term.

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Motley Fool contributor Tristan Harrison 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.

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