Wesfarmers Ltd's (ASX: WES) share price looks like it could be about to hit a new 52-week high any day now but don't let that dissuade you from considering the investment merits of this top blue-chip company.
There's one BIG reason Wesfarmers could still be worth buying even at these prices…
Unlike its supermarket peer Woolworths Limited (ASX: WOW) which is completely dependent on its retail operations, Wesfarmers is a diversified operating group which has many different drivers for the group's overall earnings.
In this sense Wesfarmers has similarities to Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) and even to Warren Buffett's Berkshire Hathaway in that they all utilises a conglomerate structure. Interestingly, despite the phenomenal returns achieved at Berkshire and the double-digit total shareholder returns Wesfarmers and 'Soul Patts' have produced for the past decade, there are very few ASX-listed companies which utilise this diversified structure.
Wesfarmers owns leading retail brands including Coles, Bunnings and Officeworks; the stock is also trading on a forecast FY 2015 fully franked dividend yield of 4.8%. These are appealing attributes but there is an even BIGGER reason to be excited about Wesfarmers.
What's really exciting for shareholders is the massive amount of cash flowing into the company thanks to the sale of its insurance businesses including the $1.8 billion sale of its underwriting operations to Insurance Australia Group Limited (ASX: IAG).
Tallied up, Wesfarmers has made around $3 billion in asset sales over the past year and there are plenty of ways that money could be put to good use. Options could include a capital return or special dividend which would certainly be nice for shareholders, however an even better use of the funds would be a value accretive acquisition or organic growth initiatives which could create substantial shareholder value and drive earnings growth into the future.
