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.
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.
