Unfortunately for its shareholders, the Wesfarmers Ltd (ASX: WES) share price has been out of form in 2022.
Since the start of the year, the conglomerate's shares have lost a disappointing 27% of their value.
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Is the Wesfarmers share price weakness a buying opportunity for income investors?
According to a recent note out of Morgans, its analysts are positive on Wesfarmers and believe recent weakness has created a buying opportunity for investors. Particularly given the quality of its retail portfolio and strength of its management team.
Morgans currently has an add rating and $58.40 price target on the conglomerate's shares.
So, with the Wesfarmers share price last trading at $43.67, the broker's price target suggests potential upside of almost 34% for investors over the next 12 months.
Its analysts commented:
WES possesses one of the highest quality retail portfolios in Australia with strong brands including Bunnings, Kmart and Officeworks. The company is run by a highly regarded management team and the balance sheet is healthy. While COVID-related staff shortages are proving to be a challenge, the core Bunnings division (>60% of group EBIT) remains a solid performer as consumers continue to invest in their homes. We see the pullback in the share price as a good entry point for longer term investors.
What about Wesfarmers' dividends?
Morgans is forecasting Wesfarmers to pay a fully franked dividend of $1.65 per share in FY 2022. It then expects the company to increase this to $1.81 per share in FY 2023.
Based on the current Wesfarmers share price, this equates to yields of 3.8% and 4.15%, respectively, over the next two financial years.
All in all, this stretches the total potential return on offer with the Bunnings owner's shares to a very attractive 38%.
