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Wesfarmers Ltd's Dividend Analysis

Assessing the Sustainability and Growth of Wesfarmers Ltd's Dividends

Wesfarmers Ltd (WFAFY) recently announced a dividend of $0.3 per share, payable on 2024-04-11, with the ex-dividend date set for 2024-02-26. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's delve into Wesfarmers Ltd's dividend performance and assess its sustainability.

What Does Wesfarmers Ltd Do?

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Wesfarmers Ltd is Australia's largest conglomerate with diverse operations spanning retail, chemicals, fertilizers, and industrial supplies. Its retail division is particularly robust, featuring leading brands such as Bunnings, Kmart, Target, and Officeworks. These subsidiaries have secured dominant positions in their respective markets, contributing significantly to Wesfarmers Ltd's pre-tax earnings. The company's overarching strategy is geared towards generating cash and enhancing shareholder value over the long term.

Wesfarmers Ltd's Dividend Analysis
Wesfarmers Ltd's Dividend Analysis

A Glimpse at Wesfarmers Ltd's Dividend History

Wesfarmers Ltd has a commendable track record of consistent dividend payments since 2010, with distributions occurring bi-annually. This history reflects the company's commitment to returning value to shareholders. To provide a clearer picture of the trend, here's a chart depicting the annual Dividends Per Share over time.

Breaking Down Wesfarmers Ltd's Dividend Yield and Growth

Wesfarmers Ltd's current 12-month trailing dividend yield stands at 2.89%, with a forward dividend yield of 2.90%, indicating anticipated dividend increases in the coming year. Over the past three years, the annual dividend growth rate was 7.10%, though this figure dips to -4.30% over a five-year span and -1.40% over the past decade. As of today, the 5-year yield on cost for Wesfarmers Ltd stock is roughly 2.32%.

Wesfarmers Ltd's Dividend Analysis
Wesfarmers Ltd's Dividend Analysis

The Sustainability Question: Payout Ratio and Profitability

The sustainability of Wesfarmers Ltd's dividends can be gauged by examining the dividend payout ratio, which currently stands at 0.84 as of 2023-06-30. This ratio is relatively high, potentially indicating a less sustainable dividend if profits were to decline. However, Wesfarmers Ltd's profitability rank is an encouraging 7 out of 10, reflecting a strong capacity for generating earnings. The company's consistent positive net income over the past decade further bolsters its financial stability.

Growth Metrics: The Future Outlook

With a growth rank of 7 out of 10, Wesfarmers Ltd demonstrates a promising growth trajectory. The company's revenue per share and 3-year revenue growth rate, which has averaged 12.20% annually, outperforms approximately 71.39% of global competitors. Additionally, the 3-year EPS growth rate of 2.90% per annum surpasses that of roughly 38.34% of global competitors, further underscoring Wesfarmers Ltd's potential for sustained dividend payments.

Next Steps

Considering Wesfarmers Ltd's dividend payments, growth rate, payout ratio, and growth metrics, investors have several factors to ponder. The company's strong market position and consistent profitability are positive indicators, but the high payout ratio may raise concerns about the long-term sustainability of dividend growth. Value investors should weigh these elements alongside their investment strategy and consider whether Wesfarmers Ltd aligns with their portfolio objectives. For those seeking high-dividend yield opportunities, GuruFocus Premium offers a valuable tool through the High Dividend Yield Screener.

This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.

This article first appeared on GuruFocus.