Better dividend: Wesfarmers or Woolworths?

The search for dividends just got hotter.

As The Australian Financial Review reported this morning, Record low interest rates in Australia could bolster the prices of high-yielding equities even further, as savers ditch the relatively poor returns from cash and bonds in favour of stocks paying reliable dividend income.”

Consumer-staple companies like Woolworths (ASX: WOW) and Wesfarmers (ASX: WES), with its revenue concentrated in retail operations such as Coles and Kmart, tend to post fairly stable results AND pay good dividends, so could be two such ideas for income-oriented investors.

How they stack up

Woolworths, currently trading at a P/E ratio of about 20 and EV to EBIDTA of about 11, pays a fully franked dividend with a yield currently in the 3.6% range.

Wesfarmers, at a P/E ratio of 22 and an EV to EBITDA of 11.6, looks a bit pricier but boasts a slightly higher yield, currently in the 3.9% range, also fully franked.

But this competitor pays 7% fully franked…

By way of comparison, far smaller competitor Metcash (ASX: MTS) trades at a P/E of nearly 25, an EV to EBITDA of about 9, but offers a yield of almost 7%. (All data courtesy of CapIQ.)

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More reading

Motley Fool contributor Catherine Baab-Muguira has no financial interest in any of the companies mentioned in this article. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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