WES share price is in focus.
Wesfarmers is a diversified Australian conglomerate headquartered in Perth. It is primarily a listed investment company with outright ownership or significant stakes in retail, chemical, fertilizer, industrial and safety brands and products companies.
Weiss Farmers has a long history of buying businesses, reinvesting in them to build cash flow and assets, then selling them at a higher price. A good example is the Coles Group, which it bought in 2007 and spun off in 2018. However, the majority of the company’s operating profit (over 50%) comes from Bunnings Warehouse, the #1 hardware and home improvement business in Australia (and the country’s most trusted brand in 2023 and 2024). Wesfarmers originally bought into Bunnings in 1987, buying the final 52 percent in 1994 for $594 million.
Other household names owned by Wesfarmers include Blackwoods, Kmart, Target, Officeworks, and Priceline Pharmacy. Wesfarmers has been a leading blue-chip stock on the ASX for decades and is known for paying consistent dividends.
ASX Consumer Discretionary Share Appeal
gave S&P/ASX200 Consumer Discretionary Index (ASX: XDJ) is back. 2.32% Compared to the broader ASX 200 by 4.77% per annum each year over the past 5 years. The consumer discretionary sector covers a wide range of goods and services, so it can be difficult to compare companies within this group. However, here are some things you may want to consider when investing in a consumer discretionary company like WES.
Timing
Consumer discretionary companies typically perform best when interest rates are low. Just think about it – when prices are low, you’re more likely to go out and buy those ‘toys’ or things you don’t really need, but definitely want. It could be new technology, travel, or your new power tools – it all falls into this category.
Despite the current high interest rate environment, WES has still managed to grow revenue by 9.2% per annum over the past three years.
profit
The returns you will receive may vary with the current economic environment, but historically many of the ASX’s consumer discretionary shares have been reliable dividend payers.
WES offers a current dividend yield of 2.6% and has averaged 3.4% over the past 5 years.
familiarity
We are often advised to invest in what we know. Consumer discretionary shares may be appropriate at this point, as these are companies we see on a daily basis and their business models are easy to understand. You probably have a better idea of how Wesfarmers Ltd makes its money than a typical tech company or B2B industrial company.
That doesn’t necessarily mean the performance will be any better, but it’s certainly easier to get your head around when you’re starting to invest.
WES share price determination
One way to get a ‘fast read’ of where the WES share price is is to study something like the dividend yield over time. Remember, the dividend yield is effectively ‘cash flow’ to a shareholder, but it can fluctuate from year to year or between payments. Currently, shares of Wesfarmers Ltd have a dividend yield of around 2.61%, compared to a 5-year average of 3.36%. Simply put, shares of WES are trading below their historical average dividend yield.
Be careful how you interpret this information – it could mean profits have fallen, or the share price is rising. In the case of WES, last year’s dividend was higher than the 3-year average, so the dividend is growing.
Rask websites offer free online investing courses, created by analysts explaining things like discounted cash flow (DCF) and dividend discount models (DDM). They even include free valuation spreadsheets! Both of these models would be a better way to value the WES share price.
