Wesfarmers Ltd (ASX: WES) shares closed 0.7% higher on Wednesday afternoon, at $73.43 a piece.
Global volatility and concern about inflation rates and the rising cost of living has smashed the retail giant's shares recently. After initially climbing 9% through the first few weeks of the year, Wesfarmers shares have crashed nearly 18% since mid-February.
Now, Wesfarmers shares are down 10% for the year-to-date and 0.3% lower than 12 months ago.
For context, the S&P/ASX 200 Index (ASX: XJO) is 0.6% lower year to date and 9.3% higher over the year.
It's clear Wesfarmers shares have come off the boil recently as Australians tighten their purse strings and prepare for ongoing instability.
But I still think there are compelling reasons why investors should buy into the stock. Here are three of them.
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1. Wesfarmers is a high-quality blue chip stock
Wesfarmers is a leading Australian blue-chip company. The business is the 6th largest company listed on the ASX with a market cap of around $823 billion. It is well-established, and financially sound with a history of reliable growth and stability.
The diversified company has broad retail operations in home improvement and outdoor living, apparel, general merchandise, office supplies, health and wellbeing. It also has a health division, and an industrials division with businesses in chemicals, energy and fertilisers, and industrial and safety products.
Wesfarmers subsidiaries include household names such as Bunnings Warehouse, Kmart Australia, Officeworks, Priceline, and more.
2. The business has had consistent earnings growth
Wesfarmers has demonstrated consistent, long-term net profit growth and a track record of delivering solid earnings despite challenging economic conditions.
For the first half of FY26, the conglomerate posted a 9.3% increase in NPAT, to $1.6 billion.
And while the company acknowledges that inflation and higher operating expenses could remain as headwinds going forward, it is confident that earnings growth will continue.
Analysts at UBS think that Wesfarmers could achieve $2.86 billion in net profit in FY26. The broker forecasts earnings to keep climbing in FY27 and beyond. It expects $3.07 billion in net profit in FY27, $3.1 billion in FY28 and a hike to $4 billion by FY30. That implies Wesfarmers earnings could jump 40% between FY26 to FY30.
3. Wesfarmers shares offer a reliable passive income
The retail conglomerate is well-known for its reliable and consistent passive income payment. In February, the Kmart and Bunnings owner declared a fully franked interim dividend of $1.02 per share, up 7.4%.
And as the company's earnings climb, its payout is expected to rise too.
UBS predicts that the business could deliver an annual dividend per share for FY26 of $2.13.
The broker expects Wesfarmers to pay an annual dividend per share of $2.31 in FY27 and $2.56 in FY28. By FY30, the broker expects the dividend to hike to $3 per share. That would be a 41% increase from FY26.
