Is the Wesfarmers share price a buy?


Wesfarmers share price

Is the Wesfarmers Ltd (ASX: WES) share price a buy?

The old conglomerate is one of the best ASX blue chips to consider in my opinion. It has been operating for over a century and show no signs of stopping its evolution.

One of the main things I appreciate about Wesfarmers is that it’s very focused on shareholder returns.

Although the decision to pay the $1 special dividend per share a few months ago wasn’t easy, it was a good outcome for shareholders. The idea of opening Bunnings in the UK was a good try, but shutting it was probably also the right call for shareholders.

I also appreciate that Wesfarmers is willing to be flexible in the types of businesses that it owns. Whilst it does have a slant towards retail businesses at the moment with Bunnings, Officeworks, Kmart and Target, I like that Wesfarmers management aren’t afraid to sell businesses or buy new ones – such as online business Catch Group and lithium business Kidman Resources Ltd (ASX: KDR).

My point is that the future is even more uncertain these days, so I would prefer owning a business that has the flexibility of changing its earnings base, rather than one stuck as a bank or a supermarket.

I also appreciate the fact that Wesfarmers management are trying to bring Bunnings up to digital retailing offering standards by rolling out online Bunnings shopping by the end of the year.

If the Australian economy is going to go on a more promising course with the tax cuts, RBA interest rate cut and APRA change then Wesfarmers could be one of the businesses to benefit due to its national presence of its various chains of stores. 

Foolish takeaway

Wesfarmers is currently trading at 21x FY20’s estimated earnings. I don’t think this is the best time to buy Wesfarmers shares, but I’d much rather buy it for dividend income over the big banks at the current prices.

Other options to consider for high-quality dividend income are these top ASX shares.

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More reading

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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