Wesfarmers Ltd (ASX: WES) shares and National Australia Bank Ltd. (ASX: NAB) shares are tempting at today's prices.
What makes Wesfarmers and NAB shares so good?
According to some investors, the best way to make money from the sharemarket is via dividends, which, in Australia, can be extremely tax-effective due to the benefit of franking credits.
Another reason many investors choose blue chip shares like NAB and Wesfarmers is their relative safety (note: relative). Compared to other ASX shares, many of the larger, more widely held ASX-listed companies with established businesses are perceived to be safer investments.
One of the key reasons they are seen to be safer can be put down to their diverse business operations. With many different business units under one roof – if one of them goes down the others should protect your downside.
Wesfarmers
Wesfarmers is the owner of Coles, Bunnings Warehouse, Kmart, Target and more. The well-diversified conglomerate has its roots in Western Australia, with a rich history which dates back more than 100 years.
Shares in Wesfarmers are often well-priced. Meaning, everyone knows it is a good business. While its 5% fully franked dividend will keep new investors company while they wait for a higher price, the current valuation of Wesfarmers leaves something to be desired, in my opinion.
NAB
NAB is Australia's business bank, which also controls a large chunk of mortgages and deposits. The past 15 years have not been kind to NAB shareholders, with its share price moving mostly sideways.
However, NAB continues to pay a tasty dividend, which is forecast to be 6.5% fully franked in the year ahead. After those franking credits are included, the grossed-up dividend yield is 9.3%!
Buy, hold or sell
At today's prices and considering the risks, I'm reluctant to buy NAB and Wesfarmers. Having said that, I'm trying to beat the market with my investments. If you only want a tax-effective dividend, you might choose to buy in today.
