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2 ASX dividend shares I’d buy before Wesfarmers Ltd

At the current Wesfarmers Ltd (ASX: WES) share price, I think shares of Vocus Group Ltd (ASX: VOC) and Mantra Group Ltd (ASX: MTR) offer better prospects.

Wesfarmers

Wesfarmers is a great business, with brands such as Coles, Bunnings Warehouse, Kmart, Target and many others at its disposal. However, I think the Wesfarmers share price has gotten well ahead of its valuation.

There are a few reasons I think Wesfarmers shares are expensive, including:

  • I think Coles is about to enter a period of slower profit growth
  • The recent boost in overall group profit was achieved thanks to higher coal prices, which I do not believe are reliable;
  • Bunnings Warehouse is a cyclical business
  • Woolworths Limited (ASX: WOW) is turning up the competition across many product lines
  • Kmart and Target could be hurt by the arrival of Amazon

2 other dividend share ideas

Don’t get me wrong I would buy Wesfarmers shares, at the right price. But with over 2,000 shares on the ASX, there are always other companies worthy of further research. Two such examples are Vocus and Mantra, in my opinion.

Vocus

Vocus is the telecommunications company behind Australian consumer names like Dodo, Primus, Eftel and more. It is also the owner of M2 Wholesale, Amcom and NextGen.

To get to where it is, the company has undertaken many acquisitions in recent years. It is still digesting the acquisitions of M2, Amcom and NextGen, which the company hopes will provide synergies over coming years.

Following a hefty sell-off, Vocus shares are now forecast to pay a dividend equivalent to a yield of 3.3% fully franked.

Mantra

Mantra is Australia’s second largest hotel and resorts operator. In addition to the Mantra brand of hotels, it owns Peppers. Many of us are familiar with hotels, but Mantra’s business model probably isn’t what you would think. Instead of purely owning and operating hotels and resorts the company makes a large chunk of its money from its booking and management systems and services.

In addition to running properties from the ground up, Mantra outsources a lot of its property management in a franchisee-type model. This makes its cost base more scalable.

According to some commentators, the chief risk to Mantra’s business is Airbnb, the online room-sharing service. However, in spite of that risk Mantra shares are tipped to offer a 4.7% fully franked dividend in the year ahead.

Foolish Takeaway

Big blue chip shares like Wesfarmers are not the only game in town. If you are investing for the long-term I think it is a good idea to build a portfolio which pays the biggest dividends tomorrow — not today.

Share price growth + dividends is the best way to generate long-term wealth in the sharemarket.

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Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any company mentioned. Owen welcomes and encourages your feedback. You can follow him on Twitter @OwenRask.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Amazon. 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.

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