Wesfarmers Ltd and Woolworths Limited: Which is the better bet for dividend seekers?

Wesfarmers Ltd (ASX:WES) and Woolworths Limited (ASX:WOW) forecast yields are not as attractive as their historic yields would suggest.

| More on:
a woman

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

Many investors buy blue chip shares such as Wesfarmers Ltd (ASX: WES) and Woolworths Limited (ASX: WOW) for their fully franked dividends.

While historical dividend data can be useful when conducting your background analysis of a company, ultimately what really matters is the dividends you, as a shareholder, receive in the future.

So although the historic pay-out can be instructive, as we will see in a moment, it can also overstate what investors can reasonably expect in the future.

Consider this

For investors contemplating acquiring shares in Woolworths or Wesfarmers today, the outlook for dividend payments in financial year (FY) 2017 is lower compared to the dividends actually received in FY 2015.

Due to the well reported problems facing Woolworths' supermarket profit margins and the slump in the coal market which has affected Wesfarmers' profitability, both companies are forecast (according to data supplied by CommSec) to pay FY 2017 dividends that will be lower than the dividends paid in FY 2015.

Importantly however, FY 2017 dividends for both companies are forecast to be above the dividends paid in FY 2016.

Here's what to expect

Wesfarmers is expected to pay dividends totalling 210 cents per share (cps) in respect of the 2017 financial year. With the share price of $41 this implies a fully franked yield of 5.1%.

Meanwhile, Woolworths is forecast to pay dividends totalling 98.5 cps. With the supermarket owner's share price at $21.60, this implies a yield of 4.6%.

Motley Fool contributor Tim McArthur has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »