The Wesfarmers Ltd (ASX: WES) share price has been steadily climbing over the past month. Shares in the Australian conglomerate have gained nearly 6% in the past 30 days, despite its bid for Australian Pharmaceutical Industries Ltd (ASX: API) being rejected in July.
However, Wesfarmers is still filled to the brim with cash – opening the doors for optionality to the company.
At the end of Monday, the Wesfarmers share price finished 1.7% higher to $62.19.
Could Wesfarmers shares be a buy?
Despite the rejection of Wesfarmers’ API takeover bid late last month, shares in the company are holding firmly. As a result, the company continues to sit on its enormous cash pile, much like other ASX-listed large caps.
Considering Wesfarmers is seeking to use its capital effectively, investors might be wondering what other options it might be weighing up.
Morgan Stanley estimates that Australian companies have accumulated roughly $40 billion of cash during the pandemic. Some ASX-listed shares have nominated to return this capital via beefed-up dividends or share buyback programs.
Such examples include Rio Tinto’s recently unveiled US$9.1 billion dividend splurge and National Australia Bank Ltd.’s (ASX: NAB) $2.5 billion share buyback.
With Wesfarmers 2021 full-year results expected on Friday 27 August, shareholders might be pondering the chances of similar rewards.
While some experts are not in favour of buybacks, Airlie Australian Share Fund portfolio manager, Emma Fisher expects more to come. The fund manager said, “The next 12 months is going to be one of significant capital returns in the Aussie market.”
What do brokers think?
According to Goldman Sachs, the reporting season could be shaping up to be a good one for Wesfarmers. Analysts are expecting full-year revenue of $34,132.1 million, representing a 10.6% increase year over year. Similarly, the broker foresees earnings before interest and tax (EBIT) to come in at $3,508 million.
Corresponding with the rise in earnings, Goldman is anticipating a juicy $1.84 dividend from the company. Based on the current Wesfarmers share price, that would indicate a potential 2.96% yield.