This is the ASX blue-chip share I'd buy for dividend income

Here's why I love this stock for payouts.

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Wesfarmers Ltd (ASX: WES) is one of the biggest companies in Australia, with a market capitalisation of $72 billion. In my opinion, it's a leading ASX blue-chip share for dividend income.

I think most readers will have heard of the main brands within this company, including Bunnings, Kmart, Officeworks and Priceline.

While these are high-quality businesses, it's the dividend potential that I'm going to talk about. For starters, I think many of Wesfarmers' businesses have proven to have resilient earnings in almost all conditions.

Is Wesfarmers a good option for dividends?

As a reminder, no dividend is guaranteed – it's not like a term deposit or savings account.

Dividends are paid from profits generated by the company. The board of directors decides the size of the dividend.

The ASX blue chip share's main objective is "to provide a satisfactory return to shareholders".

Within that goal, the company aims to continue to invest in its businesses where capital replacement opportunities exceed return requirements, acquire (or divest) businesses that are expected to increase long-term shareholder wealth and manage its balance sheet.

When it comes to paying dividends, the company objectives are:

As well as share price appreciation, Wesfarmers seeks to grow dividends over time commensurate with performance in earnings and cash flow. Dependent upon circumstances, capital management decisions may also be taken from time to time where this activity is in shareholders' interests.

Wesfarmers has grown its annual dividend more often than not in the years since the GFC. It has grown its dividend each year since the onset of COVID-19.

Is it a good time to buy?

The recent strength of the Wesfarmers share price has pushed the dividend yield lower, for now.

According to the projection on Commsec, the company could pay an annual dividend per share of $1.95, which translates into a grossed-up dividend yield of 4.3%.

The business continues to generate impressive revenue and profit performance, despite the broader economic conditions being a headwind.

Over the long-term, I believe Wesfarmers will be able to keep growing its dividend thanks to the strength of existing businesses like Bunnings and Kmart, the potential new businesses it might acquire (such as in the healthcare sector) and its sound management decision-making.

The Wesfarmers share price is not as cheap as it was, but at 24x FY26's projected earnings (according to Commsec), the ASX blue-chip share is still at an attractive price for the long-term, in my opinion.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Wesfarmers. The Motley Fool Australia has positions in and has recommended Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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