Should you invest $10,000 in Wesfarmers Ltd shares today?

Supermarket operator Wesfarmers Ltd (ASX: WES) – who owns Coles supermarket – has long been a favourite of investors.

While the company also has a raft of other businesses, its Coles business is the most visible to consumers and the easiest to understand – and I’m willing to bet Wesfarmers attracted a lot more investor interest since it bought Coles in 2007.

That said, is shareholders’ faith in Wesfarmers well placed?  Let’s take a look at how $10,000 invested in Wesfarmers 10 years ago has performed.

source: Google Finance

source: Google Finance

On 9 December 2005, $10,000 would have bought you 273 Wesfarmers shares at a price of $36.63 apiece – with one cent left over. Today, those 273 shares are worth $10,297.56, an increase in value of 2.9%.

During those 10 years, Wesfarmers paid $17.60 in dividends plus $0.35 in special dividends per share, for a total of $4,900.35. Your $10,297.56 is now worth $15,197.92, including the lonely one cent left over from your original purchase.

All dividends were fully franked, resulting in an additional potential franking credit benefit of $2,100.16.

This works out to be approximately a 72% return on your investment in the past 10 years – very decent, and it beat the pants off term deposits during that time. Unlike BHP Billiton Limited (ASX: BHP) however, which I covered yesterday, Wesfarmers’ dividend has actually fallen in the past 10 years, with 2006’s dividend being worth 230 cents per share compared to 200 cents in 2015.

Wesfarmers’ total return, however, is significantly better than BHP, which returned around 30%-50% depending on franking credits (which I couldn’t find full information on) and whether you sold your shares in South32 Ltd (ASX: S32).

Interestingly, Wesfarmers’ competitor Woolworths Limited (ASX: WOW) may have performed even better over the past 10 years, its share price is up 39% since 2005 – despite its recent woes. Wesfarmers has been held back by its coal investments.

Past performance is no indication of future performance, of course, but this article is an interesting illustration of how certain business models are more attractive over the long term, and can continue to perform in lean times as well as good.

Wesfarmers’ performance indicates it has a business model that can effectively grow shareholder wealth, and I would consider investing in it again for the next 10 years.

Before diving into Wesfarmers today, however... Discover these 3 "new breed" blue chips that pay fully franked dividends and offer the very real prospect of significant capital appreciation. Click here to discover our latest free report on these three outstanding investment opportunities.

Simply click on the link, enter your email address, and we'll send you our full coverage for free - no credit card details or payment required!

What are you waiting for? Just click here now for your copy.

Motley Fool contributor Sean O'Neill has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. 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.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.