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Wesfarmers share price rises to record highs, brokers remain bearish

As the Wesfarmers share price climbs to all-time-highs, we take a look at some of the things we learnt from yesterday's AGM.

Even as the Wesfarmers (ASX: WES) share price hits all-time highs, brokers remain subdued on the Australian large-cap. Regardless of this, we take a look as some of the key things revealed as part of yesterday’s annual general meeting (AGM).

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Past decisions driving future value

Commenting on the Wesfarmers-Coles demerger, the Group’s Chairman – Michael Chaney – said:

‘The portfolio changes during the year reflected Wesfarmers' focus on enhancing shareholder returns. It was considered a separately-listed Coles would provide greater shareholder value going forward than the value attributed by the market to the combined Group.'

Year-to-date, shareholder returns have indeed risen strongly following the demerger, with the WES share price running up 33% since January. The Coles (ASX: COL) share price has performed equally well in recent times, also rising 33% YTD.

That run-up in the Coles share price proves a significant fact, given that during the AGM it was reiterated that at the time of the demerger, 'Wesfarmers shareholders received shares in Coles amounting to 85 per cent of the company.'

Wesfarmers currently trades at all-times-highs of $42.04 per share.

The dividend remains strong

As to be expected, Wesfarmers remains committed to growing shareholder wealth through market-leading dividend payments. Here, it was pointed out at the AGM that:

'Over the last 30 years, Wesfarmers has been one of the most consistent investors in Australia and one of the biggest dividend payers.’

Mr Chaney continued by saying:

‘The big challenge is not deciding how to manage capital requirements, it is finding investments where the numbers add up.'

According to the ASX: Wesfarmers currently has an annual dividend yield of 4.32% at a franking rate of 100%.

Wesfarmers share price: the Kmart and Bunnings outlook

Speaking to the growth outlook for both Bunnings and Kmart, during yesterday’s AGM, Rob Scott – Wesfarmers’s Managing Director – commented that:

'The growth in commercial and trade, investment in digital capabilities and platforms, together with the growing store network, will support the next phase of Bunnings' growth.'

Second to this and though Kmart struggled in FY19, Mr Scott pointed out that the Group has:

‘Seen progressive improvement in Kmart’s sales since the end of the financial year as a result of further investments in value, improvements in product and better availability.’

This positive commentary regarding two of Wesfarmers key businesses extended to Group’s overall outlook. Here Mr Scott said he remains:

‘Optimistic about the outlook for the Group and we have confidence that the investments we are making in the customer offer and new growth platforms will deliver value to shareholders.'

With the Wesfarmers share price now at all-time-highs, it seems the market too is positive about the outlook for Wesfarmers.

Analysts remain bearish

All-time-highs and a positive outlook hasn’t sated bearish brokers mind you. For example, Citibank has today retained their sell rating and a $34.50 price target on the conglomerate. Macquarie was slightly more optimistic, with a neutral rating and a share price target of $37.50 on Wesfarmers.

Morgan Stanley however proved the most pessimistic, slapping an underweight rating and a $32.00 price target on the large-cap.

Yet with the solid Wesfarmers dividend and market-beating year-to-date performance, Wesfarmers shareholders are likely to be paying little attention to such views.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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