MENU

Wesfarmers share price up 6% after announcing a special dividend

One of the best performers on the ASX 200 on Thursday has been the Wesfarmers Ltd (ASX: WES) share price.

In morning trade the conglomerate’s shares are up a sizeable 6% to $34.77 following the release of its half year results and the announcement of a special dividend.

What happened in the first half?

Due to the demerger of the Coles Group Ltd (ASX: COL) business and the disposal of the Bengalla, Kmart Tyre and Auto Service (KTAS), and Quadrant Energy businesses, Wesfarmers’ first half accounts were reasonably messy.

Revenue including discontinued operations fell 13.2% to $31.152 million and EBITDA tumbled 7.7% to $2,770 million.

However, its results from continuing operations were significantly better. Revenue came in 4.2% higher at $14,388 million and EBITDA excluding significant items was 8.6% higher at $1,911 million.

Net profit after tax from continuing operations and excluding significant items was $1,080 million, up 10.4% on the prior corresponding period. On a per share basis this came to 95.5 cents.

The Wesfarmers board declared a 100 cents per share interim dividend and a further 100 cents per share special dividend. Both dividends will be fully franked.

The board decided to reward shareholders with the latter after completing a number of actions taken to reposition its portfolio over the 12 months. According to the release, “this capital management activity distributes to shareholders the profits realised on asset disposals and takes into account Wesfarmers’ available franking credits, strong balance sheet, robust credit metrics and cash flow generation while preserving balance sheet capacity to take advantage of value-accretive growth opportunities, if and when they arise.”

How did its remaining businesses perform?

The Bunnings Australia and New Zealand (BANZ) business posted a 5.2% increase in revenue to $6,909 million and a 7.9% increase in earnings to $932 million.

Management advised that its earnings growth “was achieved despite a moderation of trading conditions and high levels of growth in the prior corresponding period and was assisted by an ongoing focus on cost control and continued favourable commercial property market conditions.”

The Kmart Group business, which comprises both Kmart and Target, grew revenue by 0.8% but saw earnings decline 3.8% to $383 million.

The Officeworks business performed well and grew revenue by 8.2% to $1,100 million and earnings by a solid 11.8% to $76 million. The ‘every channel’ strategy has been working well, driving strong sales growth across stores and online.

Finally, the continuing operations of its Industrials business posted a small decline in half year earnings to $227 million.

Outlook.

Management believes the company is well-positioned for growth over the long term, especially given the strength of its balance sheet following repositioning of its portfolio.

It intends to use this balance sheet strength to take advantage of value-accretive growth opportunities, if and when they arise, in order to create value for shareholders over the long term.

No formal guidance was provided for the full year.

Should you invest?

I think Wesfarmers would be a great option for investors at the current price. This is especially the case for income investors with its shares currently offering a trailing fully franked 6.4% dividend yield. This yield increases to approximately 9.3% when you include the special dividend.

Overall, I think it would be a great option along with Coles and ahead of rival Woolworths Group Ltd (ASX: WOW).

Analyst Names 3 Best Dividend Shares to buy in March

NEW! The Motley Fool’s team of crack analysts has just released a timely report revealing the names and codes of their top 3 dividend share recommendations for 2019. Be among the first investors to get access—FREE, for a strictly limited time. You’ll discover the names of 3 hefty dividend paying companies with what our analysts consider to be solid growth prospects for the year ahead…

The first two currently offer fat, fully franked yields and the third is a surprising REIT offering you the chance to become a landlord with none of the hassle! If you’re looking for hot new ideas, look no further. But you do need to hurry. Snap up your free copy now, before supplies run out!

Simply click here to grab your FREE copy of this up-to-the-minute research report on our top 3 dividend share recommendations right away.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET. 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 Scott Phillips.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…

Including:

The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!