Should you buy Wesfarmers (ASX:WES) shares in August 2021 for the dividend yield?

Is the company a buy for its upcoming dividend this month?

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The Wesfarmers Ltd (ASX: WES) share price has continued to climb higher throughout 2021, delivering 23% returns to shareholders year-to-date.

The retail conglomerate is highly regarded as a safe bet in the investing world. Wesfarmers owns businesses such as Bunnings, Kmart, Officeworks and, of course, a stake in Coles Group Ltd (ASX: COL). However, Coles has its own identity on the ASX and operates as a separate entity.

When most people invest in blue-chip companies, they are generally seeking ongoing dividends more so than growth. After all, Wesfarmers with a market capitalisation of around $70.5 billion, is unlikely to double in value anytime soon. Therefore, shareholders won’t be expecting its share price to break past $120.00 without significant time invested.

During market close on Tuesday, Wesfarmers shares finished relatively flat at $62.21.

Quick take on Wesfarmers’ recent dividend history

Over the last 12 months, Wesfarmers have paid dividends to shareholders of $1.83 per share. This comprises FY20’s final dividend of 77 cents per share along with a special dividend of 18 cents. The special dividend reflected the distribution of profits on the sale of the group’s 10.1% interest in Coles during FY20. The last dividend payment came from the company’s interim FY21 report, paying shareholders 88 cents per share.

Based on the current share price of Wesfarmers, this translates to a dividend yield of around 2.9%. It’s worth noting though that all of its dividends have been fully-franked, which offsets any tax liabilities.

What to expect for Wesfarmers upcoming dividend?

While Wesfarmers isn’t due to report its FY21 financial results until 27th August, investors may be curious about what to expect for the upcoming dividend.

According to Goldman Sachs, analysts are expecting Wesfarmers to report full-year revenue of $34,132.1 million. This implies an increase of 10.7% compared to the prior corresponding period.

Earnings before interest and tax (EBITDA) is forecasted to come in at $3,508 million, reflecting a 9.6% lift on FY20.

In line with the strong earnings, the broker predicts a full-year dividend of $1.84 per share. When factoring in the FY21 interim dividend payment of 88 cents, this equates to about 86 cents for the second half.

How is the Wesfarmers share price valued?

Goldman Sachs’ latest report maintained its buy rating on the retail conglomerate’s shares. The investment bank indicated a 12-month price target of $59.70, which is slightly lower than the current Wesfarmers share price.

A reason for the bullish performance of the company’s shares could be that the market is anticipating better-than-expected results.

Should you invest $1,000 in Wesfarmers right now?

Before you consider Wesfarmers, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Wesfarmers wasn't one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COLESGROUP DEF SET and Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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