At time of writing, the share price of Wesfarmers Ltd [ASX:WES] is up 7.32%, trading at $35.12.
Overall it has been a decent 12-month period for the stock, with a 15.7% return for the year in the wake of the Coles Group Ltd [ASX:COL] demerger:
The latest news out of the company is its half-year results release and the announcement of a special dividend.
Wesfarmers share price action suggests investors appreciate the dividend
Some highlights from the half-year results:
- Record NPAT of $4.538 billion
- Record NPAT includes demerger of Coles and disposals of Bengalla, Kmart Tyre and Auto Service and Quadrant Energy
- NPAT from continuing operations up 10.4% to $1.08 billion
- Net debt down $3.256 billion to $324 million
- A special dividend of $1.00 per share (fully franked)
Commenting on its outlook, the company said:
‘[Wesfarmers] remains well-positioned for growth over the long term. Actions taken to reposition the portfolio have significantly strengthened the balance sheet and placed the Group in a strong position to deliver improved shareholder returns.’
Other highlights include improved online sales, which grew by 34% and continued growth across Bunnings, Officeworks and the WesCEF business.
Earnings from Kmart and Target were more subdued with a 3.8% fall — slightly below last month’s guidance.
Coles demerger doing the trick for Wesfarmers
It appears the Coles demerger may be aiding the Wesfarmers share price as it is up 4% since the move.
As noted before, Wesfarmers shed a huge amount of its debt via the demerger and now can focus more closely on its core businesses.
Furthering this point, Bunnings now accounts for 58% of group earnings.
If you include the special dividend, the yield rises to around 9.3% — almost double what Coles could be offering with its 80–90% payout ratio.
As a stable stock that has the ability to avoid the retail carnage and pay a good dividend, it has its appeal.
For Money Morning