Owning Wesfarmers Ltd (ASX: WES) shares has been a very pleasing investment for passive income for a long time. The owner of Kmart and Bunnings has delivered strong profits and appealing capital growth for investors over the years.
The business has grown its annual dividend each year since 2020 following the demerger of Coles Group Ltd (ASX: COL). FY25 was no exception, as the board of directors decided to increase the payout by 4% to $2.06 per share. This was helped by an increase of 3.7% by the underlying earnings per share (EPS) to $2.34.
However, past dividends are already history. The next dividend payments are much more important, in my view. We're going to take a look at what the dividend income could be in 2026 with a $10,000 investment.
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Passive income projections for Wesfarmers shares
According to the broker UBS, Wesfarmers is predicted to pay an annual dividend per share of $2.11 in FY26. This translates into a dividend yield of 2.4%, not including franking credits.
If someone invested $10,000 into the retail giant, then in FY26 they would receive approximately $239 of passive income in cash and a further $102 in franking credits based on the UBS projection.
But, the forecast on Commsec has a different projection, with the estimation that Wesfarmers could pay an annual dividend per share of $2.10. This translates into a dividend yield of 2.4%, excluding franking credits.
If someone invested $10,000 into Wesfarmers shares, they'd receive of $238 of passive dividend income and another $102 of franking credits, based on the Commsec projection.
Is the ASX shares a buy for dividends?
I wouldn't suggest buying (or avoiding) a business just because of passive income considerations. I think the valuation and earnings outlook needs to be compelling too.
Wesfarmers is becoming increasingly high quality, with the return on capital (ROC) of both Kmart and Bunnings rising in FY25 compared to FY24, reaching 67.6% and 71.5%. This suggests to me the business is capable of producing strong returns with additional money invested in those two key businesses, which bodes well for future profit and Wesfarmers share price growth, in my view.
However, the Wesfarmers valuation has risen to reflect that quality – the Wesfarmers share price has risen more than 20% in the last 12 months.
I'd call Wesfarmers one of the highest-quality ASX dividend shares available to Aussies, but it isn't as cheap as it was a year ago and doesn't offer as appealing of a dividend yield.
For a blue-chip, I still think it's a solid long-term buy, particularly if Kmart continues growing Anko's international earnings. But, it wouldn't be my number one buy for passive dividend income today.
