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Wesfarmers Ltd boosts dividend by 10.4%

Wesfarmers Ltd (ASX: WES) has once again enshrined its blue-chip status by providing shareholders with a 10% boost to their interim dividend.

The release of the conglomerate’s half-yearly results showed a 4% rise in revenues to $31.853 billion and an 11.2% increase in net profit after tax to $1.429 billion compared to the previous corresponding period (pcp).

On a per share basis, earnings per share (EPS) were up 11.2% to $1.24 and an interim dividend of 85 cents per share (cps) was declared, a rise of 10.4% on the prior interim dividend of 77 cps.

The profit result did include a one-off gain from the sale of the group’s 40% interest in Air Liquide and an increase in reserve estimates from the Christchurch earthquake. Adjusting for these ‘one-offs’ profit growth was a still healthy 6.3%.

The retail businesses with the exception of Target were the stand-out performers during the half.

Coles delivered a 10.7% increase in earnings and boosted return on capital (ROC) to 10%. Bunnings and Officeworks achieved earnings growth of 8.5% and 10.5% respectively. Kmart recorded growth in earnings of 5.7%, while Target’s earnings plunged 52.7%.

Results from the remaining businesses were mixed. The Resources division saw earnings decline 36.6% due to lower coal export prices. The Insurance division recorded a 4.8% fall in earnings. The Chemicals, Energy and Fertiliser division reported a 5.8% increase in underlying earnings while the Industrial and Safety division experienced a 17% decline in earnings.

Management’s outlook statement provided guidance that the group’s retail businesses should continue to expand as the firm pursues further growth opportunities and portfolio renewal and development. With regards to Target, management noted that a strategic plan is underway and second-half earnings are expected to be above the pcp but that trading is expected to remain “challenging”. The remaining industrial businesses were all seen to have positive long-term prospects with some short-term headwinds in the Chemical, Energy and Fertilisers division as well as in the Resources division. Gaining regulatory approval for the sale of the underwriting division to Insurance Australia Group Ltd (ASX: IAG) is progressing to plan.

Foolish takeaway

No doubt investors in Woolworths Limited (ASX: WOW) will note the improved result from the Coles business and continued solid performance from the Bunnings business with interest.  Wesfarmers’ overall group results were once again solid and the company’s ability to raise the dividend by over 10% was impressive indeed.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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