The Wesfarmers Ltd (ASX: WES) share price looks appealing to me, with the S&P/ASX 200 Index (ASX: XJO) stock having a number of attractions, in my opinion.
In the ASX 200, there are obviously 200 different names to choose from. From my perspective, Wesfarmers has nearly always seemed like one of the more attractive businesses to choose and August (or now) seems like a good time to invest.
Diversification and flexibility
Over time, some businesses go into decline. Look at what happened to Kodak, Blackberry, MySpace, and many more global names. There have been plenty of names on our streets that have closed too, such as Dick Smith and Video Ezy.
Changes in technology, household preferences, and new competition can rapidly change the situation for companies.
Wesfarmers is the parent company of some of Australia's most recognisable businesses like Bunnings, Kmart, Officeworks, and Priceline.
It also has an industrial and safety division which includes Blackwoods, Coregas, and Workwear.
As well, it has the Wesfarmers Chemicals, Energy and Fertilisers (WesCEF) division. It's a key player in Western Australia for ammonia, LPG, LNG, and fertiliser.
Wesfarmers has a growing healthcare division which includes Priceline. It also recently announced the acquisition of InstantScripts and Silk Laser Australia Ltd (ASX: SLA).
I like the diversification offered by the company's various segments. It's also very appealing the company can diversify its business further through acquisitions in different industries, such as its lithium joint venture play Covalent Lithium with the Mt Holland project.
The lithium project is getting closer to being completed. It's been suggested that Mt Holland could add more than $1 billion in annual earnings to Wesfarmers when operational.
Wesfarmers shares are better value
Since 26 April 2023, the Wesfarmers share price has dropped by 7%, which is a decent drop in a relatively short amount of time. It's also down around 25% from August 2021.
With the fact the company's earnings are up (and projected to keep rising), the Wesfarmers share price is clearly better value than it was before.
In the company's FY23 half-year result, Wesfarmers' earnings per share (EPS) rose by 14% to $1.22.
Commsec numbers suggest it could make $2.17 of EPS in FY23, $2.20 of EPS in FY24, and $2.51 in FY25. That would be growth of 15% between FY23 to FY25. It's now priced at 23x FY23's estimated earnings.
Get entitlement to the dividend
The ASX 200 share is scheduled to release its full-year result on 25 August 2023, which is also when it will announce its FY23 final dividend.
Estimates on Commsec suggest the business could pay a final dividend of 98 cents per share which would be a grossed-up dividend yield of 3%.
In the space of about 14 months, Wesfarmers shares are likely to pay three half-year dividends.
Foolish takeaway
Wesfarmers is a great business and I think it will be one of the better-performing retailers during this period thanks to its value-focused offerings. The diversification means it can continue to future-proof itself, while the valuation and dividend are attractive, in my view, to grab in August 2023.
