Latest news with #Wesfarmers'
Epoch Times
30-04-2025
- Business
- Epoch Times
Why a Canadian Giant Sees a Bright Future in This Australian Retail Chain
As the economic order undergoes a major structural shift, Canadian investors have jumped on retail opportunities in down under. Australia's largest discount retailer, The Reject Shop, is a quiet achiever on the business front and is known locally for selling a range of cheap goods from confectionary, tupperware, to gardening tools. The chain has 390 stores across Australia—65 more than the Wesfarmers' owned Kmart. But things may not be so quiet anymore. The Reject Shop's share price surged when Canadian discount store giant Dollarama put its $259 million (US$165 million) takeover offer out in late March. Dollarama agreed to purchase all shares of The Reject Shop for $6.68 per share, more than twice the chain's last closing price of $3.15 on March 26. Related Stories 2/3/2025 12/3/2024 The hefty offer provided immediate and attractive value to shareholders, leading the share price to surge to 111 percent—its largest gain since The Reject Shop first opened in 1981. The bold move raised some eyebrows in a stakeholder meeting, but Dollarama's bosses maintain that The Reject Shop will have a bigger, better, and brighter future. Dollarama, which runs more than 1,000 stores in Canada—plus discounts chains in the Americas with expansion planned for Mexico—says despite the widespread presence of The Reject Shop, there is still room to grow and untapped market potential. Speaking at a presentation to stakeholders late last month, Dollarama president and CEO Neil Rossy said his company saw potential to nearly double the number of stores. 'We also believe that once converted to our business model, the TRS (The Reject Shop) platform will provide a strong foundation for future growth—this is reflected in our objective to grow their network to approximately 700 stores by 2034,' he said. While Rossy said the two companies ran on very similar models and values, he said one bump in the road would be labour and real estate costs, which are significantly higher in Australia than in Canada. Additionally, despite The Reject Shop's dominance in the market, stocks have been down for years. They appear as minor issues for Dollarama's executives. 'We think that with our know-how on one side, and our capital we believe that we can service significant value and we think our offer is fair in that context,' Rossy said. 'The management team at TRS has done a fantastic job bringing the business where they are today, but we think we could help them bring it to the next level with our know-how and expertise and the capital necessary to grow the business.' The deal is set to be officially concluded in 3-4 months. Consumer Trends in High Inflation Period Dollarama's excitement to take on a department store chain selling small, cheap and discounted items could be fuelled by the current high inflation environment, which has pushed many Aussies to cut back on discretionary spending. Last year, Monash University revealed findings that showed larger, more expensive items were less popular with shoppers. But The Reject Shop, and its Canadian counterpart, largely stock household items, small furnishings, as well as snacks and some food items. Data from the Australian Bureau of Statistics (ABS) also shows household spending is slowly recovering—in February 2025, household spending increased 3.3 percent on the year before.
Yahoo
22-02-2025
- Business
- Yahoo
Two Days Left Until Wesfarmers Limited (ASX:WES) Trades Ex-Dividend
Readers hoping to buy Wesfarmers Limited (ASX:WES) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase Wesfarmers' shares on or after the 25th of February, you won't be eligible to receive the dividend, when it is paid on the 1st of April. The company's next dividend payment will be AU$0.95 per share. Last year, in total, the company distributed AU$1.98 to shareholders. Looking at the last 12 months of distributions, Wesfarmers has a trailing yield of approximately 2.6% on its current stock price of AU$76.12. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing. Check out our latest analysis for Wesfarmers Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Its dividend payout ratio is 88% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be worried about the risk of a drop in earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Dividends consumed 71% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations. It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously. Click here to see the company's payout ratio, plus analyst estimates of its future dividends. Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Wesfarmers earnings per share are up 5.9% per annum over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future. Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Wesfarmers's dividend payments are effectively flat on where they were 10 years ago. From a dividend perspective, should investors buy or avoid Wesfarmers? Earnings per share growth has been unremarkable, and while the company is paying out a majority of its earnings and cash flow in the form of dividends, the dividend payments don't appear excessive. In summary, it's hard to get excited about Wesfarmers from a dividend perspective. So if you want to do more digging on Wesfarmers, you'll find it worthwhile knowing the risks that this stock faces. For example - Wesfarmers has 3 warning signs we think you should be aware of. If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Sign in to access your portfolio
