Wesfarmers Ltd (ASX: WES) shares are likely to be volatile this week, but it could be a smart ASX dividend share pick for passive income amid all of the pain.
Wesfarmers is best known as the owner of Bunnings, Kmart and Officeworks. But, it owns plenty of other businesses like Priceline, Target, healthcare businesses, chemical, energy and fertiliser (WesCEF) businesses, and more.
I believe that out of all ASX retail shares, Wesfarmers could be a leading choice because of its focus on providing customers with good-value products.
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Good idea for passive income
The business has increased its annual payout per share since 2020 following the demerger of Coles Group Ltd (ASX: COL). Not many ASX retail shares can point to a record like that.
Companies with a consistent record of growth seem more likely to continue increasing their payout, as long as the profit keeps heading higher over the long-term.
Analysts are currently optimistic that the business can continue growing its shareholder payments.
According to Commsec, the business is currently projected to pay an annual dividend per share of $2.16 in FY26 and then $2.33 in FY27.
Given how much volatility Wesfarmers shares could face this week, I'm going to just calculate what the passive income would be using the valuation at the time of writing.
The forecast FY26 payout translates into a grossed-up dividend yield of more than 4.2%, including franking credits. It's a cash dividend yield, excluding franking credits, of around 3%.
$20,000 investment in Wesfarmers shares
Investing $20,000 into the retail giant (at the time of writing) and unlocking those yields would mean receiving cash payments of around $600 per year and $840 of grossed-up dividend income, including franking credits in FY26.
Of course, that'd just be year one.
If the projections on Commsec are right, then shareholders could see an 8% increase in the dividend payout in FY27, which would mean the figures I mentioned above would become approximately 8% larger year-over-year.
Is this a good time to invest in Wesfarmers shares?
A volatile market is not an easy thing to navigate.
However, if we just ask ourselves the question of whether we'd prefer to invest at a higher valuation or lower valuation, then I think the answer is obvious.
The market is presenting us with lower share prices almost across the board. This week seems like a good time to invest because of the lower valuations.
I know I'll be putting some money into the ASX share market today.
