Well, Wesfarmers Ltd (ASX: WES) shareholders would be a fairly content bunch at the moment. WES shares just capped off a solid month of gains in November, with the Wesfarmers share price rising from $39.96 to $42.37 over the month. That’s a rise of 6.02%, which is roughly double what the overall market returned during the same period.
Going off today’s prices, WES shares are now up 31.47% for the year to date (YTD). If you were lucky enough to own Wesfarmers before the Coles Group Ltd (ASX: COL) spin-off in November 2018, your COL shares would have also experienced a 35% YTD gain on top of that (provided you didn’t sell out).
Why have Wesfarmers shares been outperforming?
No major news has come out of the ASX’s largest conglomerate recently, but I’d say a lot of positive sentiment around Wesfarmers has been driven by its Coles spin-off, which has proved lucrative to shareholders. Since Wesfarmers still owns around 15% of Coles, Coles’ wins are Wesfarmers’ wins.
The poor sentiment that has surrounded the banks recently may also be assisting. Wesfarmers is estimated to offer a grossed-up yield of around 5% going forward, which makes it one of the best non-banking, non-mining blue-chip dividend shares on the market right now.
In our current era of low interest rates, a good solid dividend is worth a lot more than it used to be.
Throughout 2019, Wesfarmers has also made a few acquisitions, including Kidman Resources (a lithium producer). With lithium prices, and by extension, miners having a particularly nasty year, Wesfarmers’ taking advantage of this may prove to be a winning move in a few years’ time – especially considering the increasing success of electric vehicle companies like Tesla.
Is Wesfarmers a buy today?
On today’s prices, Wesfarmers is trading for around 24 times its earnings. Although I wouldn’t call WES shares cheap at this level, I wouldn’t call them expensive either.
Thus, Wesfarmers could be a good stock to pick up today if you’re searching for a solid yield outside the banks and miners.
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Sebastian Bowen owns shares of Tesla. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Tesla. The Motley Fool Australia owns shares of Wesfarmers Limited. 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.