One of the best things about Wesfarmers Ltd (ASX: WES) shares is the dividend income. With a $5,000 investment, investors can get a very healthy amount of passive income.
Wesfarmers isn't exactly a household name, but it's the company that owns well-known businesses like Bunnings, Kmart, Target, Officeworks, Catch and Priceline.
One of the main goals of the company is to deliver good shareholder returns, including a growing dividend over time.
The business is indeed expected to pay a higher dividend in FY24, so let's have a look at what the passive income might look like with a $5,000 investment.
What passive dividend income will Wesfarmers shares pay?
The S&P/ASX 200 Index (ASX: XJO) share is expected to pay an annual dividend per share of $1.86, according to Commsec.
Wesfarmers' dividend could then grow by 2.7% in FY24 to $1.91 per share. At the current Wesfarmers share price, that represents a fully franked dividend yield of 4.1% or 5.8% grossed-up.
If a new investor were to put $5,000 into Wesfarmers shares right now, they'd be able to buy 106 of them.
Using the projected dividends that I was just referring to, those 106 shares could pay $202.46 of cash and a grossed-up total of around $289.
Is this a good time to invest?
To me, it is a good time to invest because it's down 11% since the 2023 peak in late April and it's down 6% from the price on 5 July 2023, as we can see on the chart below.
Wesfarmers has a number of high-quality businesses in its portfolio. Being able to buy exposure to these at a cheaper price is attractive in my opinion.
It's heavily exposed to the retail sector, but the value offerings of Bunnings and Kmart could keep Wesfarmers in good stead as shoppers look for a bargain. With the Mt Holland lithium project on its way, earnings could get a real boost in the next couple of years. I think this a good time to 'buy the dip'.
