Owning Wesfarmers Ltd (ASX: WES) shares could be a great idea for investors looking for a resilient business in these uncertain times. As a bonus, the Wesfarmers dividend is steadily increasing over time for shareholders.
Wesfarmers may not be a name we see at a shopping centre or on our streets, but it owns a few of Australia's most recognised retailing businesses. Bunnings, Kmart, Officeworks, Priceline and Target are all under the Wesfarmers umbrella.
Additionally, the business has other segments that help diversify earnings – the chemicals, energy and fertiliser (WesCEF) division (which includes lithium mining), a number of healthcare businesses, and an industrial and safety division.
After seeing the numbers in the recent FY26 half-year result, analysts are forecasting encouraging trends for the Wesfarmers dividend in the coming years.
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FY26
Following its FY26 half-year result, the experts at UBS said that Bunnings enjoys strong revenue growth options across categories, channels (with digital growth) and customers. The commercial segment represents half of the market, but only 38% of sales. These growth options are capital-light.
Kmart Group's revenue slowed after the annual general market (AGM) because of Target, which suffered from weaker apparel sales and the unplanned closure of the Queensland distribution centre.
Kmart's growth options include "driving greater category participation from existing customers & ongoing product development to gain share in more categories."
Officeworks is investing in a transformation that should reset its cost base, improve its technology and service.
UBS said that WesCEF was the key source of positive surprise in the first half of FY26 thanks to strong ammonia nitrate and fertiliser, as well as lithium (though Mt Holland production and higher lithium pricing).
Overall, HY26 saw the company report revenue growth of 3.1% to $24.2 billion, operating profit (EBIT) growth of 8.4% to $2.5 billion and net profit after tax (NPAT) growth of 9.3% to $1.6 billion.
The solid performance helped earnings per share (EPS) climb 93% to $1.41 and the dividend per share jumped by 7.4% to $1.02.
UBS predicts that the business could deliver an annual dividend per share for FY26 of $2.13. That would be a grossed-up dividend yield of 4%, including franking credits, at the time of writing.
FY27
The business is expected to increase its payouts in the subsequent years, which is great news for investors wanting passive income.
In the 2027 financial year, the business is projected to pay an annual dividend per share of $2.31.
FY28
A further dividend increase is forecast for the 2028 financial year, with owners of Wesfarmers shares expected to receive an annual dividend per share of $2.56.
FY29
The 2029 financial year is projected to see Wesfarmers pay an annual dividend of $2.85 per share.
FY30
The last year of this series of projections is the 2030 financial year, which could see the business pay an annual dividend per share of $3, which would be a 41% rise from FY26.
In terms of the outlook for the consumer, UBS said:
The Australian consumer is supported by population growth, a resilient labour market (employment growth continues albeit slowing recently), household wealth and rising retirement incomes.
Cost of living pressures are not worsening but are not easing, with consumers adjusting spend in food (trading down to private label & promotions), liquor (consuming less, trading down) and general merchandise & apparel, while the hoped for recovery in big ticket items has been slowed as further interest rate cuts have been replaced by interest rate rises given elevated CPI (UBS Economics [forecast] another 25bps in May26).
Given this backdrop, which remains robust but not as buoyant as 6mths ago, retailers with a strong value offering (e.g. Bunnings & Kmart)…appear best positioned.
The outlook seems positive for owners of Wesfarmers shares, in my view.
