Wesfarmers Ltd (ASX: WES) shares are an excellent option for Australians seeking passive income. It's such a solid business that I'd rather invest in it than receive the Age Pension.
Wesfarmers is the company that owns various businesses such as Bunnings, Kmart, Officeworks, Priceline, Target, a chemicals, energy and fertiliser business called WesCEF and other healthcare businesses (such as InstantScripts).
Australia's Age Pension is one of the most generous in the world. The maximum per fortnight that a single person can receive was recently hiked to $1,237.70 per person.
For me, there are two key reasons why I'd prefer Wesfarmers shares to the Age Pension.
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The payout is growing faster than inflation
The Age Pension is regularly growing over time, with inflation playing a key role in how fast it increases.
However, the Wesfarmers dividend is growing faster. Therefore, my cash flow could steadily improve beyond the Age Pension if I started with the same income.
In FY26 – the financial year that finished in June 2026 – Wesfarmers' board decided to hike its annual dividend per share by 7.8% to $2.22. That payout growth rate was significantly more than the inflation rate.
Its dividend is projected to increase again in FY27. According to Commsec's forecast, the business is expected to grow its payout by 5.5% in FY27, 6.5% in FY28, and 8.8% in FY29.
Of course, projections are not guaranteed future payments.
Potential for a rising Wesfarmers share price
Another reason I prefer this ASX dividend share is its potential for capital growth. I think it's a good thing to have a strong asset base.
In the past four years, it has risen by 70%, at the time of writing. Past performance is not a guarantee of future returns.
The business has proven that its main businesses are excellent at growing their earnings. In FY26 alone, Bunnings Group (which includes Beaumont Tiles) grew earnings by 5.1%, and Kmart Group grew earnings by 6%. WesCEF grew earnings by 18.5%, but it's significantly smaller than Bunnings and Kmart.
In my view, for two retailers to deliver solid growth in a difficult retail environment is really impressive.
Both Bunnings and Kmart achieve returns on equity (ROC) of close to 70%, while Wesfarmers' overall return on equity (ROE) was 35.5%. The company achieves enormous returns on money invested in certain areas of the business, which, to me, is a stronger indicator that future internal investments can help profit grow.
Over the long-term, profit growth is the best driver for the Wesfarmers share price, so I'd say this business is a solid 'compounder' option.
How many shares it'd take to match the Age Pension
I'm going to focus on the FY27 payout, given that investors have already received the FY26 dividend.
The business is projected to pay an annual dividend per share of $2.34 in FY27. The maximum Age Pension currently annualises to an approximate total of $32,180.
If we exclude franking credits from the income goal, it'd take 13,753 Wesfarmers shares. Including franking credits, it would take 9,627 Wesfarmers shares to match the Age Pension.
But, I wouldn't suggest putting someone's entire investment portfolio into one business. I'd include other quality ASX shares as well.
