Owning Wesfarmers Ltd (ASX: WES) shares usually means getting a solid dividend yield each year. Based on projections, it's looking positive for investors wanting passive income growth and a larger dividend yield.
Wesfarmers is best known as the company that operates Bunnings, Kmart and Officeworks. But, it also has businesses like Target, Priceline, InstantScripts and WesCEF (chemicals, energy and fertilisers).
Given how it generates its earnings across a variety of high-quality sources, the business is well positioned to deliver pleasing cash payments as well as long-term capital growth.
Let's take a look at how big the Wesfarmers dividend yield could be in the coming years.
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Dividend projection
Wesfarmers is projected to pay an annual dividend per share of $2.16 in FY26 according to the forecast on Commsec.
At the time of writing, the projected payout for the 2026 financial year translates into a forward grossed-up dividend yield of 4.1%, including franking credits.
Pleasingly, according to the estimate on Commsec, the company is expected to increase its dividend again in the 2027 financial year by 7.9% to $2.33.
If the company does deliver that enlarged dividend in FY27, that would be a grossed-up dividend yield of 4.5%, including franking credits, at the time of writing.
Wesfarmers is also projected to deliver rising earnings per share (EPS) in FY26 and FY27, reaching $2.55 and $2.74, respectively.
Growing profit is an essential part of driving shareholder returns, including the dividend payments, so it's good to see earnings are projected to rise 7.6% in FY27.
The company is currently valued at 29x FY26's estimated earnings, at the time of writing.
Latest outlook comments
When the company announced its FY26 half-year result, it made some largely positive commentary, which could bode well for the Wesfarmers dividend yield.
The company said:
Wesfarmers remains well positioned to deliver satisfactory returns to shareholders over the long term, supported by its portfolio of cash generative businesses with market-leading positions, strong balance sheet and commitment to invest to strengthen its existing divisions and develop platforms for growth.
Wesfarmers recognises the impact of inflation on households and businesses, and the retail divisions play an important role in the community through offering everyday low prices. Bunnings and Kmart's well-established everyday low price operating models deliver sustainable growth in earnings through a relentless focus on productivity and low prices.
Australian consumer demand remains solid, but cost of living pressures are being felt unevenly across the economy and impacting many households. The recent interest rate rise and uncertainty regarding the outlook for inflation and interest rates are affecting consumer sentiment, while higher operating expenses are weighing on business confidence and spending.
Overall, I think the company can help households and businesses with good value products from Kmart and Bunnings during this period, allowing them to capture market share. This could be key to long-term returns from the current level.
